ANNUAL REPORT
AND ACCOUNTS
2nd Floor, Coastal Building,
Wickham’s Cay II, PO Box 2221, Road Town,
Tortola, British Virgin Islands, Registration number: 669758
GEM DIAMONDS LIMITED
www.gemdiamonds.com
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CONTENTS
PRESENTING THE GEM
DIAMONDS ANNUAL REPORT
AND ACCOUNTS 2021
STRATEGIC REPORT
Our guiding principles
The salient features of 2021
2021 in numbers
How the Group is structured
Our business model
Why invest in Gem Diamonds
Overarching business drivers
Chairperson's statement
Our stakeholder relationships
Our strategy
Our approach to climate change
Risk management
Viability statement
PERFORMANCE REVIEW
Chief Executive's review
Chief Financial Officer's review
Operations review
Sustainability
1
2
3
4
6
7
8
10
11
14
17
22
26
37
45
47
48
52
60
67
GOVERNANCE
Chairperson's introduction to corporate governance
Governance at a glance
Directorate and executive management
Corporate governance statement
Nominations committee
Sustainability committee
Audit committee
Remuneration committee
DIRECTORS' REPORT
FINANCIAL STATEMENTS
REPORT ON PAYMENTS TO
GOVERNMENTS
ADDITIONAL INFORMATION
Abbreviations and definitions
Contact details and advisers
Directors' and Executive Management CVs
Disclosures related to the recommendations of the TCFD
86
87
90
92
94
106
109
113
118
144
147
212
215
216
217
218
223
This icon indicates additional information available
on the Group’s website at www.gemdiamonds.com
This icon refers the reader to further information
about the Group’s sustainable development activities
on the Group’s website at www.gemdiamonds-
reports.co.za/reports/sd-2022/index.php
This QR code refers the reader to the Group’s
website www.gemdiamonds.com
1
PRESENTING THE GEM DIAMONDS
ANNUAL REPORT AND ACCOUNTS 2021
The Annual Report and Accounts (this report) covers Gem Diamonds Limited
and its subsidiaries (the Group) for the financial year ended 31 December
2021. The Annual Report should be read in conjunction with the Sustainability
Report where we detail environmental, social and governance matters.
This report has been prepared in accordance with:
• Applicable English and British Virgin Islands law.
•
Regulations and best practice as advised by the Financial
Reporting Council (FRC) and the Department of Business,
Innovation and Skills in the United Kingdom (UK).
• Guidance from the Value Reporting Foundation’s Integrated
Reporting Framework, which is publicly available at
www.integratedreporting.org.
• Guidance from the Global Reporting Initiative (GRI)
Standards as updated in 2021.
• Guidance from the Task Force on Climate-related Financial
Disclosures (TCFD).
• Guidance from the International Finance Corporation
Environmental, Health and Safety (IFC EHS) Guidelines and
Equator Principles.
• Applicable standards of the International Organization for
Standardisation (ISO).
•
•
•
Information on payments made to governments was
compiled as required under the UK’s Report on Payments
to Governments Regulations 2014 (as amended December
2015) as applicable to companies involved in extractive
activities. It is also intended to satisfy the requirements of the
Disclosure and Transparency Rules of the Financial Conduct
Authority in the UK.
International Financial Reporting Standards (IFRS).
The UK Corporate Governance Code 2018, which is publicly
available at www.frc.org.uk.
THE 2021 REPORTING SUITE
In addition to this report, our reporting suite includes:
Sustainability Report 2021 (report and
interactive platform)
Additional
information and case studies on the Group’s
sustainability activities can be found on www.gemdiamonds-
reports.co.za/reports/sd-2022/index.php and
in our 2021
Sustainability Report.
Our Approach to Climate Change
Report
Additional information on the Group’s approach to climate
change and related financial disclosures can be found on
www.gemdiamonds.com/results-reports-presentations.php and
in our 2021 Our Approach to Climate Change report.
Board approval of this report
The Board, supported by the Audit Committee, acknowledges
its responsibility to ensure the integrity and completeness
of this report. The Board applied its collective mind to the
preparation and presentation of this report. We consider the
broader interests of our workforce and other stakeholders,
including the communities and environment in which we
operate, when making decisions. We believe that the report
provides a balanced and appropriate representation of the
Group’s performance, strategy and material risks. Acting
fairly and in good faith, we considered what is most likely to
promote the sustainability and success of Gem Diamonds in
the long term.
The Board approved the Annual Report and Accounts 2021,
which includes the Strategic Report on pages 2 to 46, on
16 March 2022.
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Presenting the Gem Diamonds Annual Report and Accounts 2021 | Strategic report | Performance review
Governance | Directors’ report | Financial statements | Report on payments to governments | Additional information
3
STRATEGIC REPORT
OUR GUIDING PRINCIPLES
CARAT
Purpose
Unearthing unique possibilities
CLARITY
Vision
To support, develop and empower
our people so that:
• A meaningful, sustainable contribution can be made
to the countries in which we operate.
• We can deliver long-term value to our shareholders.
• Our employees can benefit in the short and long term.
COLOUR
Culture
At Gem Diamonds we invest in our workforce to create an
environment where every person is proud to be part of our
family. Mutual respect and care are not only shared throughout
the Group but extend to the wider society and the natural
environment in which we operate. Individuals are valued for their
differences and are empowered to thrive, grow and contribute to
a common goal, holding themselves and each other accountable
for delivering on their promises.
CUT
The way we do things (values)
Care – We listen and respond responsibly to the needs of our
employees, communities and shareholders. We honour our
commitments to all stakeholders, and we care for the natural
environment in which we operate.
Trust – We empower our people and trust them to make
decisions that will deliver on our strategy.
Ethical – We have zero tolerance for bribery and corruption
and conduct ourselves in a manner consistent with good
governance practices. We pride ourselves on being socially and
environmentally responsible.
Respect – We cultivate an open and transparent culture
where we value the beliefs, ideas and contributions of all our
stakeholders. Everyone matters and is treated equally. We pride
ourselves on the respect we have for all our stakeholders and
the natural environment in which we operate.
Flexible and open-minded – We encourage and consider
ideas from employees and project-affected communities while
remaining responsive and agile.
Passionate and fun – We enjoy the work that we are fortunate to
do and the people we do it with. We seek opportunities to explore
and develop while encouraging a healthy work-life balance.
Refer to our Chairperson’s statement on page 14.
Gem Diamonds Limited Annual Report and Accounts
2021
4
5
THE SALIENT FEATURES OF 2021
Zero fatalities. Lost time injury performance improved significantly
in the second half of the year following the ‘Stop for Safety’
campaign held in June 2021 and the implementation of several
specific interventions to drive organisational safety culture maturity.
Refer to our case study on page 61 for more information.
109 697 carats sold, an increase of 11%, in six well-attended tenders,
including a first trial viewing in Dubai. Prices achieved reflect a
continued recovery in the diamond market, supported by strong
consumer demand, particularly in the US and China.
Group tailings storage facility standards and policies have
been appropriately aligned with the International Council on
Mining and Metals’ (ICMM) Global Industry Standard on Tailings
Management (GISTM), and relevant governance structures have
been established. Tailings management expenditure, including
the profiling of the old tailings storage facilities (TSF), amounted to
US$2.8 million for the year.
The Group successfully concluded its Climate
Change Scenario Analysis (CCSA) to identify
and assess its physical climate change risks
as part of the adoption of the Task Force on
Climate-related Financial Disclosures (TCFD)
recommendations. A total of US$0.2 million
was invested in climate change-related work
during the year.
Successful conclusion of the Group-wide debt
refinancing. An additional funder joined the
lender group, bringing the total number of
funders to three. The Group’s revolving credit
facilities were increased from US$61.3 million
to US$77.0 million, in dollar equivalent. Security
for the RCFs was implemented after year end.
The Business Transformation (BT) four-year
in
cumulative target of US$100.0 million
revenue, productivity and cost savings was
exceeded by the end of 2021 by achieving
US$110.0 million.
A total of US$0.7 million was invested towards
the operational response to mitigate the
impact of COVID-19 on our workforce and
operations to date. 99% of the workforce is fully
vaccinated to date.
Refer to our case study on page 82 for more
information.
6.2 million tonnes of ore treated, an increase
of 15% compared to 2020, notwithstanding
numerous challenges during the year, including
the ongoing impacts of COVID-19 on people
and critical supply chains, extreme weather
conditions, power supply interruptions, poor
plant performance and a breakdown of the
primary jaw crusher in Q3.
A binding share sale agreement was entered
into for the sale of the Ghaghoo diamond
mine in Botswana. Regulatory conditions and
approvals are in place and the transaction is
expected to be complete by 31 March 2022.
Strong delivery on corporate social investment (CSI) projects, including projects delayed in 2020 due to COVID-19-related lockdowns
and restrictions. Localised flooding in the first quarter of 2021 caused significant damage to roads and infrastructure, restricting access
to project-affected communities (PACs) and further delaying CSI project execution. US$0.8 million was invested in COVID-19 relief and
CSI projects in communities during the year.
Gem Diamonds Limited Annual Report and Accounts
2021
6
6
7
2021 IN NUMBERS
HOW THE GROUP IS STRUCTURED
2020
% change
Measure
Average price per carat achieved (US$)
Revenue (US$ million)
Total direct cash cost (excluding waste costs) per tonne treated (LSL)
Total direct cash cost (including waste costs) per tonne treated (LSL)
Total operating cost per tonne treated (LSL)
EBITDA1 (US$ million)
Profit for the year (from continuing operations) (US$ million)
Corporate costs (US$ million)
Basic EPS2 (from continuing operations) (US cents)
Cash and short-term deposits (US$ million)
Cash generated from operating activities
Drawn down bank facilities (US$ million)
Net cash3 (US$ million)
Available bank facilities (US$ million)
Cumulative Business Transformation benefits delivered (US$ million)
Average number of employees (including contractors)
Gender diversity (% female employees)
Skills development (training hours)
Fatalities
Lost time injuries (LTIs)
Lost time injury frequency rate (LTIFR)
All Injury Frequency Rate (AIFR)
COVID-19 response investment (US$ million)
COVID-19 vaccination rate (%)
ISO 45001 (occupational health and safety) certification
Capital expenditure (US$ million)
Ore tonnes treated (millions)
Waste tonnes mined (millions)
Carats recovered (thousands)
Carats sold (thousands)
2021
1 835
201.9
201.1
335.5
271.8
57.4
31.1
8.9
13.2
31.1
71.3
10.2
20.9
74.3
110.0
1 671
22
33 694
0
6
0.24
0.93
0.7
98
Yes
4.0
6.2
18.7
115.3
109.7
1 908
189.6
201.5
326.6
320.2
53.2
27.5
8.0
12.1
49.8
96.2
15.2
34.6
60.8
79.2
1 702
20
13 101
0
1
0.04
0.76
1.1
n/a
Yes
1.6
5.4
15.6
100.8
99.2
(4)
6
–
3
(15)
8
13
11
9
(38)
(26)
(33)
(40)
22
39
(2)
10
157
–
500
500
22
(36)
n/a
–
150
15
20
14
11
167
–
–
13
–
Corporate Social Investment (CSI) (US$ million)
Major or significant stakeholder incidents
Major or significant environmental incidents
Greenhouse gas emissions (tCO2e)
ISO 14001 (environmental management) certification
0.8
0
0
153 864
Yes
0.3
0
0
135 694
Yes
Financial
People
Operational
Sustainability
1 Refer Note 4, Operating profit on page 179 for the definition of non-GAAP (Generally Accepted Accounting Principles) measures.
2 Refer to Group financial performance for GAAP measures.
3 Net cash is a non-GAAP measure and calculated as cash and short-term deposits less drawndown bank facilities (excluding the asset-based finance facility and insurance
premium financing).
Gem Diamonds Limited Annual Report and Accounts
SALES AND MARKETING
The Group’s diamond sorting, sales and marketing operation in Belgium:
•
Maximises the revenue achieved on diamond sales.
• Develops the Gem Diamonds brand in the market.
• Enhances customer relationships.
Most of our diamonds are sold through a tender process. Technical
mapping and analysis determine the value of Letšeng's large high-
quality rough diamonds and is used to achieve the highest rough value
through multiple selling channels.
The Group’s electronic tender platform provides an enhanced
experience for clients and significantly increases internal efficiencies
in the sales and marketing function, while ensuring highest obtainable
prices on an international market.
Gem Diamonds Marketing Services (100% ownership)
HEAD OFFICE
The Group’s holding company, listed
on the London Stock Exchange which
provides oversight of governance
structures and overall strategy, is
based in London, United Kingdom.
Gem Diamonds Limited
DIAMOND ANALYSIS AND
MANUFACTURING
The Group’s high-tech rough diamond analysis
operation in Belgium:
• Estimates the value of exceptional large
high-value rough diamonds through
technical mapping and analysis.
• Manages the manufacturing process of
selected diamonds through third-party
manufacturers for final polished sale.
Baobab Technologies (100% ownership)
TECHNOLOGY AND INNOVATION
A Cyprus company that houses the Group’s
innovation and technology research and
development projects and related intellectual
property rights.
Gem Diamonds Innovation Solutions (100% ownership)
LETŠENG
Our flagship open pit diamond mine in Lesotho
is the highest achieving average US$ per carat
kimberlite mine in the world.
The operation focuses on mining and processing
ore safely, responsibly and efficiently from its two
kimberlite pipes (Main and Satellite) which are 17.0ha
and 5.2ha, respectively. Ore is processed through
three treatment plants with an annual throughput of
6.5 million to 7.0 million tonnes and carat recoveries
of 100 000 carats to 120 000 carats.
Letšeng Diamonds is 70% owned by Gem Diamonds Limited
and 30% owned by the Government of the Kingdom of Lesotho
with a lease period until 2029, with an exclusive option to renew
until 2039.
GHAGHOO
An underground diamond mining
development in Botswana placed on care
and maintenance in 2017 and classified as a
discontinued operation held for sale since
2019. The Group is currently concluding the
sale process.
Gem Diamonds Botswana (100% ownership)
TECHNICAL AND ADMINISTRATIVE SERVICES
A wholly owned South African mining services
company providing technical support to the Group
across the entire value chain.
Gem Diamond Technical Services (100% owned)
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9
OUR BUSINESS MODEL
TYPICAL DIAMOND VALUE CHAIN
OUR BUSINESS MODEL CONTINUED
ROUGH DIAMONDS
POLISHED DIAMONDS
DIAMOND JEWELLERY
PRODUCTION
SALES
MANUFACTURING
SALES
MANUFACTURE JEWELLERY
RETAIL SALES
• Mining ore and waste
•
•
•
Processing ore
Recovering diamonds
Sorting diamonds
•
•
Rough diamond analysis and sorting
Sale of rough diamonds
Rough diamonds manufactured
polished diamonds
into
•
•
Wholesale of polished diamonds
Trading in polished diamonds
Design and manufacturing of
diamond jewellery
Retail sales to the end consumer
Rough diamond
Cut and polished diamond*
The diamond in
jewellery state*
Blockchain solutions connect the end user and the producer. Read more on page 24.
INPUTS REQUIRED
Letšeng is a long-term asset with an open pit resource base with the potential for further underground expansion. It is a low-cost operation
with a track record of successful mine plan optimisation and cost-reduction initiatives.
• Mine lease period to 2029 with an exclusive option to renew to 2039.
•
•
Total mineral resource of 5 million carats.
1 153 404 GJ of energy consumed.
•
•
1.15m3 water per tonne treated.
Social and Environmental Management Plans implemented.
• Workforce of 1 671 people (including contractors) with an absenteeism rate of 4.5 days per annum per person.
•
•
•
•
•
•
•
US$0.9 million investment in COVID-19 response.
Highly experienced global management team.
451 registered clients.
OUR APPROACH
The health, wellness and development of our workforce are priorities throughout the Group.
The Group continues to take all necessary precautions in line with its COVID-19 protocols to ensure the welfare of our employees, contractors
and the communities in which we operate, and the continuation of safe and responsible operations.
Zero tolerance for harm of employees, human rights violations, bribery and corruption.
The Group values and safeguards its social licence to operate.
Top revenue drivers:
•
•
•
•
•
• Main versus Satellite pipe ore mix at Letšeng
Resource grade performance
Diamond market
Number of large (>10ct) high-quality diamonds recovered
Exceptional large, high-value diamond recoveries
Reduction in diamond damage
•
•
Available undrawn debt facilities US$74.3 million.
Annual capex investment of US$4.0 million.
Top cost drivers:
•
•
•
•
•
Necessary waste stripping
Increasing depth of pits, longer haulage distances
Cost of remoteness of mines
Foreign exchange rate fluctuations
COVID-19 impact on supply chains
Rough carats sold: 109 697
Rough carats recovered: 115 335
OUTPUTS
697 >10ct diamonds, contributing 71% of revenue
21 diamonds selling for more than US$1 million, contributing
US$64.5 million to revenue
OUTCOMES: 2021 DELIVERY
Total carbon footprint of 153 864tCO2e
Zero major or significant environmental incidents
8.9 million m3 of water recycled
100% of diamond exports comply with the Kimberley Process
Letšeng rehabilitation provision of US$11.2 million
Since inception, Gem Diamonds has worked in partnership with the Government of
Lesotho to make a positive contribution to national priorities. We continue to support
government’s efforts to combat COVID-19 and invest in initiatives in PACs that support
long-term and sustainable development.
The Sustainability Report provides a comprehensive report on environmental, social
and governance matters.
Gem Diamonds has adopted six United Nations Sustainable Development Goals (UN
SDGs) as part of our Sustainability Framework:
Zero fatalities
LTIFR of 0.24
AIFR of 0.93
99% of employees fully vaccinated against COVID-19 to date
Human rights training included in employee induction programme
Zero major or significant stakeholder incidents
Supply chain controls in place to prevent child and forced labour
Invested US$0.2 million in community and country COVID-19
prevention programmes
Resettled PACs: 0
Letšeng in-country procurement: US$158.7 million
Letšeng paid royalties of US$18.0 million
Focus on cash generation and cost containment during the year
Cash generated per share 0.51 US cents
Basic earnings per share (BEPS) from continuing operations
13.2 US cents
Average price per carat achieved of US$1 835
Return on average capital employed of 27%
Earnings before interest, tax, depreciation and amortisation (EBITDA)
of US$57.4 million
Revenue of US$201.9 million
Our viability statement on page 45 explains how the outcomes ultimately lead to a sustainable business model that delivers on our vision.
*Images supplied by Graff Diamonds International.
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11
WHY INVEST IN GEM DIAMONDS
OVERARCHING BUSINESS DRIVERS
The Group has a number of attributes that make it a unique and
compelling investment proposition.
Large, high-value diamonds
Embedded Board governance
Integrated environmental,
social and governance (ESG)
strategy
Transparent, world-class multi-
channel sales and marketing
Low-cost operator
Cash generating, strong
balance sheet and proven
financial resilience
Responsible, agile leadership
Long life asset
Disciplined capital allocation
Internal growth opportunities
funders,
OPERATING RESPONSIBLY
Shareholders,
regulators,
employees, communities, consumers and
other stakeholders expect companies to
behave responsibly at all times. This includes
providing safe working conditions and fair
labour practices for its workforce, operating
in an environmentally responsible manner,
ensuring safe operation and governance
of dams and tailings storage
facilities
and contributing to global, national and
regional sustainability priorities.
Consumers, shareholders and funders are
increasingly interested in ESG factors when
making buying, investment and lending
decisions.
Refer to the climate and sustainability
sections on pages 26 and 67 of this report,
and the Sustainability Report for more
insight.
GEM DIAMONDS’ POSITION
We are committed to ethical business practices and regard corporate governance
as an essential aspect of long-term sustainability and value creation. Workplace
safety is an absolute priority and we are continuously improving our safety
systems and processes. The Group remains strongly committed to environmental
sustainability and Gem Diamonds’ inclusion in the FTSE4Good index recognises the
high standards of ESG practices we have in place. We have adopted six UN SDGs
and the TCFD recommendations, and have successfully aligned our tailings storage
facility management practices with the ICMM’s GISTM.
in the Gemological
All diamond exports comply with the Kimberley Process1. Gem Diamonds also
participates
Institute of America’s (GIA) Diamond Origin
programme, which provides consumers with information regarding the country of
origin of their diamonds, as well as the positive impact the diamonds we mine have
on the communities and countries in which we operate.
US$0.9 million invested in environmental stewardship
(2020: US$0.5 million)
0.93 AIFR
(2020: 0.76)
Zero major or significant environmental and stakeholder incidents reported
(2020: Zero)
SUSTAINABLE RETURNS
Our
future requires that we generate
sustainable returns for shareholders, while
continuing to create value for our other
stakeholders.
Refer to the CEO Review and the CFO
Review on pages 48 and 52 respectively for
more information on the Group’s financial
results and position.
GEM DIAMONDS’ POSITION
Our strategic focus on extracting maximum value from our operations prioritises
production optimisation and consistency, continuously improving efficiencies,
reducing costs and generating cash flow. Since the start of the COVID-19 pandemic,
the Group has prioritised cash flow generation and maintaining cash reserves. By
ensuring sustainable returns, the Group can continue to access equity and debt
funding to sustain current operations, maintain a sustainable dividend policy, and
invest in our preparations for the future.
US$57.4 million EBITDA2
(2020: US$53.2 million EBITDA)2
1 The Kimberley Process (KP) unites administrations, civil societies, and industry in reducing the flow of conflict diamonds around the world. For more information visit:
https://www.kimberleyprocess.com.
2 Refer Note 4, Operating profit on page 179, for the definition of non-GAAP measures.
2021
Gem Diamonds Limited Annual Report and Accounts 12
12
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OVERARCHING BUSINESS DRIVERS CONTINUED
OVERARCHING BUSINESS DRIVERS CONTINUED
MARKET DEMAND FOR
DIAMONDS
Demand for rough diamonds is driven by
consumer demand for
jewellery which
depends on global economic growth and
disposable income. The growing custom of
diamonds used in bridal jewellery in India
and China, the increased use of diamonds
across a wider range of luxury goods, and
the continued growth in the number of
high-net-worth
individuals worldwide
support growth in demand for polished
diamonds.
GEM DIAMONDS’ POSITION
We sell our diamonds on tender and we are therefore, to a large extent, subject to
immediate market forces. Diamonds from Letšeng are at the top end of the market
in terms of size, colour, quality and price. High-net-worth customers for large high-
quality polished diamonds tend to be less affected by global economic fluctuations
and historically the prices for larger high-quality diamonds have proven more resilient
to market pressures.
Rough diamond prices have seen a strong recovery since the middle of 2020, with
prices for larger high-value diamonds accelerating quickly. Prices on our smaller
diamonds (<5 carats) have also improved significantly in 2021, which has been
supported by price increases imposed for smaller diamonds by De Beers and ALROSA
in Q1 2022. Contributing factors supporting a positive diamond market in 2021
included positive market sentiment, a decrease in the supply of similar size, quality
and value diamonds in the market, improved demand for high-value polished
diamonds from China in particular, and depleted stock levels at manufacturers.
Notwithstanding the continued recovery of the diamond market, the average price
per carat achieved for Letšeng’s diamonds during the year was 4% compared to 2020.
This was mainly due to fewer large diamond recoveries (seven greater than 100 carat
diamonds sold compared to 16 in 2020, and 16 diamonds between 60 and 100 carats
compared to 29 in 2020) due to lower value areas of the resource that were mined.
Rough vs. Polished price chart – 52-Week
Indexed to value of 100 on January 2, 2021
140
As of December 27, 2021
100
60
1 Feb 21
1 April 21
1 June 21
1 Aug 21
1 Oct 21
1 Dec 21
ROUGH (B2B)
POLISHED (B2C)
Source: Data provided by Paul Zimnisky (www.paulzimnisky.com). Rough diamond price is based on the Zimnisky
Global Rough Diamond Price Index. More information can be found at www.roughdiamondindex.com. Polished
diamond price is based on data gathered via sampling of online retailers, specifically round, 0.3-1.5 carat, near-
colourless, VS-clarity, VG-cut diamonds).
The above graph reflects the increase of both rough and polished diamond prices
during 2021 indexed to 2 January 2021.
US$1 835 average price per carat achieved in 2021
(2020: US$1 908 per carat)
71% of revenue derived from diamonds greater than 10.8 carats in 2021
(2020: 81%)
DIAMOND SUPPLY
The supply of diamonds is directly linked to
the economics of diamond mining in that
extended periods of low rough diamond
prices lead to mine closures and a resultant
decrease in supply. Large producers tend
to maintain stockpile inventory, primarily in
lower value commercial diamonds, which
they release into the market when demand
starts to improve, resulting in a slower price
increase in the short term following such
increases in demand.
lab-grown diamonds
is
The supply of
increasing, along with
their size and
quality. These diamonds sell at a significant
discount to natural diamonds and continue
to take market share, particularly for smaller,
commercial type diamonds. The impact on
natural diamond demand and price is not
yet fully understood and will depend on
consumer preferences and perceptions.
GEM DIAMONDS’ POSITION
Annual global rough diamond production is expected to steadily decrease to around
110 million carats by 2030, having peaked in 2017 at 151 million carats. Current
production volumes of around 118 million carats are fast approaching the forecasted
2030 levels of 110 million carats, largely due to a combination of aged mine closures,
closure of marginal mines as a result of the impact of COVID-19, and the suspension
or slowdown of certain other operations. The shortfall in large high-quality rough
diamonds grew further in 2021, largely due to reduced supply into the market since
the start of the COVID-19 pandemic in March 2020 and peer company exclusive take-
off arrangements to single buyers.
We have a number of initiatives in place to reduce diamond damage in mining and
processing to improve the recovery of large, undamaged high-value diamonds.
The Group continues to investigate new technologies for early detection and non-
mechanical liberation of these special diamonds without damage.
Demand for Letšeng’s large, high-value diamonds continues to be strong and
competition from lab-grown diamonds is yet to be seen on this end of the premium
market.
118 million carats global rough diamond production in 2021 (estimated)
(2020: 107 million carats)
SOCIAL CONTRIBUTION
The Letšeng mine, which
is co-owned
with the Government of the Kingdom of
Lesotho, is an important employer and
makes a significant positive contribution
to the economy and social development of
the country.
Refer to the sustainability section on page
67 and the Sustainability Report for more
insight.
GEM DIAMONDS’ POSITION
We regard ourselves as guests in the countries we operate in, and endeavour at
all times to maintain strong and constructive relationships with our employees,
communities, regulators, governments and wider society. Our vision commits us to
supporting, developing and empowering our people, and to making a meaningful,
sustainable contribution to the countries and communities in which we operate.
The Group’s social investments in surrounding communities aim to improve
education, develop infrastructure (roads, bridges and water supply) and stimulate
local enterprises to create self-sustaining employment independent of the mine.
Refer to our community engagement and impact case study on page 80.
The Letšeng mine makes a substantial contribution to the Lesotho economy through
dividends, royalties and tax contributions, and provides jobs for more than 1 592
people. This number does not include casual workers who are regularly employed at
Letšeng on a short-term basis. The mine also provides procurement opportunities to
support the local economy and the broader population of Lesotho.
48 Student scholarships since 2006
US$48.3 million paid in dividends, royalties and taxes in Lesotho
(2020: US$12.3 million)
US$0.8 million invested in local communities
(2020: US$0.2 million)
US$158.7 million Letšeng in-country procurement
(2020: US$126.2 million)
Gem Diamonds Limited Annual Report and Accounts
2021
14
15
CHAIRPERSON’S STATEMENT
CHAIRPERSON’S STATEMENT CONTINUED
The Board took measures in 2021 to enhance risk management, improve
stakeholder relations and meet the board independence requirements
of the UK Governance Code.
Dear shareholders,
On behalf of your Board of Directors, I am pleased to share the
Gem Diamonds Annual Report and Accounts for 2021, which
describes both the Group’s performance during the past year
and the progress we have made against our longer-term strategic
objectives.
2021 was certainly not without its challenges, with a combination
of the impact of renewed COVID-19 waves and restrictions,
planned periods of mining in lower grade areas of the resource
and extreme weather conditions. Pleasingly, notwithstanding
these challenges, operational stability improved significantly
towards the end of the year. We also saw the positive effect of
several important safety interventions (including a 24-hour ‘Stop
for Safety’ campaign in June 2021) returning the operation to its
usual strong level of safety performance following a number of
disappointing safety incidents in the first half of the year. In parallel,
robust global demand for our large high-value diamonds resulted
in a solid financial performance of EBITDA of US$57.4 million, an
increase of 8% on 2020, and revenue of US$201.9 million.
CONTINUOUSLY IMPROVING OUR
GOVERNANCE APPROACH
As stewards of the interests of all stakeholders of the Group,
the Directors strive to continuously improve governance and
oversight. Good governance is the bedrock upon which the
Group’s reputation rests and it underpins operational efficiency,
the relationships we have with employees, local communities
and governments, and the respect we have for and in which we
are held by our shareholders and the wider market. Ultimately,
good governance is a crucial element in the sustainability of our
business and the preservation of value for all stakeholders.
The Board’s priorities in 2021:
•
•
Ensuring safe and stable operations during the
COVID-19 pandemic.
Enhancing risk management systems and processes.
• Overseeing the adoption of the TCFD
recommendations and Group climate change strategy.
•
Resolving certain shareholder concerns regarding the
Board’s independence.
• Overseeing the renewal of the Group’s funding
arrangements.
• Overseeing the pending sale of the Ghaghoo mine.
“Good governance is a crucial element in
the sustainability of our business and the
preservation of value for all stakeholders”
– Harry Kenyon-Slaney –
During the past year, we worked hard to further refine our risk
management systems and processes. This has enabled us to
improve the identification, quantification and mitigation of
operational and wider environmental and societal risks, and to
assess their potential impact against the risk tolerance levels we
judge appropriate for the Group. Practical examples include the
restructuring of our insurance cover to mitigate the substantial
recent increase in insurance cost and further refinement of our
tailings management systems to align them fully with the ICMM’s
GISTM. Effective risk management and ongoing stakeholder
engagement ensure that the Board is kept appraised of issues as
they emerge and evolve, and that new opportunities are brought
to the Board’s attention.
As part of our governance process, we continually review our
approaches to combatting systemic challenges. This year we have
again reassessed and refreshed our positions on human rights,
modern slavery, corruption and climate change. I am pleased that
all employees and contractors have reaffirmed their commitment
to these statements.
ADDRESSING SAFETY AND
CLIMATE CHANGE
We regard the safety and health of our workforce as our highest
priority and, while we are not complacent and can always do
better, our track record over recent years has been solid. It was
therefore a concern to the Board that our safety performance
deteriorated during the first six months of 2021, but management
took swift action to turn the situation around. The Letšeng mine
was shut down for a full day in a ‘Stop for Safety’ campaign to allow
the workforce to be addressed. A new safety culture programme
was launched to reinforce the message that production must
happen safely or not at all. Pleasingly the second half of the year
showed a sharp recovery. The AIFR for the full year was 0.93.
Letšeng is located in a remote and pristine region of the world
and the Board has always been sensitive to the need to operate
in an environmentally responsible manner. In 2021, the existential
threat of climate change moved to the centre of the public’s
consciousness and is top of mind for political and business
leaders. As a mining company that is necessarily a sizeable
consumer of energy, we have commenced the process of both
understanding our contribution to greenhouse gas emissions
and what we can do to limit it. Climate change is now a topic of
discussion at every Board meeting and is a top priority in our risk
management system.
Gem Diamonds has adopted six priority goals from the 17 UN
SDGs and our ongoing inclusion in the FTSE4Good index is an
external validation that our positive ESG practices align with global
standards and expectations. There were no major or significant
environmental incidents reported at any of our operations during
the year.
VALUING DIVERSITY, SKILLS AND
EXPERIENCE
While ours is a small Board, appropriate for the size of the Group,
we are committed to aligning with the requirements of the UK
Corporate Governance Code. In May, Johnny Velloza (previously
deputy CEO) stepped down from the Board to ensure that the
Board meets the independence requirements of the Code.
We are grateful to Johnny for his significant contribution and
commitment over the last five years and we continue to benefit
from his technical expertise as a strategic adviser.
We welcomed Rosalind Kainyah MBE to the Board. Rosalind
has decades of experience in corporate and environmental
law, government relations, political risk management and
sustainability. Her experience in diamond mining includes an
Executive Director position at the De Beers Group and she adds
valuable ESG and leadership skills to the Board.
leadership
The Nominations Committee oversees board and senior
management succession planning, and this important work
ensures that the Group’s
is appropriately sized,
regularly refreshed, diverse and equipped with the necessary
skills. We believe that the Board, as currently constituted, contains
the right balance of critical thinking capabilities, skills and
experience and that the complementary perspectives included
ensure appropriate independent oversight of the Group.
We are proud of our track record of local appointments and
promotions with a representation of nearly 98% Lesotho nationals
at Letšeng and steadily improving gender diversity throughout
the Group.
LISTENING TO OUR
STAKEHOLDERS
As the operator and 70% owner of the Letšeng mine, we regard
ourselves as guests of the people of Lesotho. We endeavour to
always maintain constructive, open and honest dialogue with
local communities and government partners. We consider their
priorities and ensure that they in turn understand the nature of
our business and Letšeng’s significant contribution to the national
economy.
Since joining the Board in July 2019, Mazvi Maharasoa has been the
designated non-Executive Director for workforce engagement.
She engages directly with employee representatives and provides
the Board with an unfiltered view on issues that people wish to
raise. This engagement process has broadened our understanding
of various concerns and has enhanced the channels via which
employees can communicate with management and see their
issues being resolved. The Board values this process as it gives
us reassurance that employee voices are heard at the top of the
organisation and has helped to strengthen our relationships with
them. These interactions have been particularly important while
access to the mine has been restricted during the COVID-19
pandemic.
Presenting the Gem Diamonds Annual Report and Accounts 2021 | Strategic report | Performance reviewGovernance | Directors’ report | Financial statements | Report on payments to governments | Additional information2021Gem Diamonds Limited Annual Report and Accounts 16
17
CHAIRPERSON’S STATEMENT CONTINUED
ENTRENCHING AN ETHICAL
CULTURE
Gem Diamonds has always maintained a strong set of ethical
principles that remain the firm foundation of everything we
do. We insist on transparency and have no tolerance for fraud,
theft, modern slavery, child labour or any other wrongdoing. The
culture espoused by the Board and senior management is one of
transparency, openness, a willingness to challenge and to change,
and these principles promote high standards of ethical behaviour
throughout the Group. To support these principles we maintain
a rigorous system of internal controls, a comprehensive internal
audit programme and an anonymous whistleblowing facility.
SUSTAINABLE RETURNS FOR OUR
SHAREHOLDERS
In line with our dividend policy to pay a dividend to shareholders
when the financial strength of the Group allows, we are pleased
to propose that a dividend of 2.7 US cents per share be declared
for the 2021 financial year.
ACKNOWLEDGING OUR
STAKEHOLDERS’ CONTRIBUTIONS
Operating a large mine high in the Maluti Mountains of Lesotho
under the constraints of COVID-19-related travel and access
restrictions once again provided a considerable test for everyone
at Gem Diamonds during 2021. Management’s ability to oversee
the operation remotely for extended periods is a testament first
and foremost to the ability and fortitude of our workforce, to the
quality of the systems and culture in place at the mine and the
strength of our relationships with local community leaders and
with the Government of the Kingdom of Lesotho.
On behalf of the Board, I therefore want to thank everyone who
has contributed to the Group’s success this past year despite
considerable disruption to their lives and those of their families.
We thank our employees, contractors, our community partners,
the Government of the Kingdom of Lesotho and our shareholders
for their ongoing support. Finally, I wish to thank my fellow
Directors for the dedication and commitment they showed and
the valuable contributions they made during the year.
BEING CONFIDENT ABOUT THE
FUTURE
While there are some signs that the COVID-19 pandemic
may be starting to wane, there remains a risk of further
resurgences. The success of our efforts to largely shield our
people over the past two years has given us confidence that
we have the systems and processes in place to deal with this
risk, to keep our people safe and maintain the supply chain
that our operations depend on.
2021 marked the end of the four-year period over which
we delivered in excess of the target of US$100 million by
achieving US$110.0 million in revenue, productivity and
cost savings generated through the Business Transformation
programme launched in 2017. In 2022, our goal is to
build on the success of this effort by further improvement
focused
of our operational consistency through the
implementation of a rigorous continuous improvement
culture. In addition, we vigorously continue to exploit
opportunities to optimise the mine plan and to reduce
our waste profile, investigate future options to explore
underground mining at Letšeng and progress several
technological innovations in our processing plants.
in 2021 provides a strong
The climate change scenario analysis that the Group
foundation to
undertook
incorporate climate change-related risks and opportunity
considerations into future business plans, strategies and
feasibility studies.
Diamond prices have recovered steadily since the second
half of 2020 due to an improving market outlook and
declining supply. Prices increased further in 2021 and it is
pleasing to note that this trend has continued into 2022.
While predicting the frequency of the recovery of large
diamonds is impossible in the short term, consistent delivery
of plant throughput volumes is the best way to yield results
over time.
Harry Kenyon-Slaney
Chairperson
16 March 2022
OUR STAKEHOLDER RELATIONSHIPS
Our relationships and transparent and regular engagement with our
stakeholders supports improves decision-making, promotes sustainability
and ensures Gem Diamonds’ positive contribution to society.
STAKEHOLDER MANAGEMENT
Gem Diamonds’ strong relationships with stakeholders, particularly employees, regulators, communities and society, underpins the Group’s
social licence to operate. The relationships built and information obtained through regular engagements with these stakeholders, provides
relevant input for decision-making, promotes the long-term sustainability of the Group and enables our contribution to wider society.
The Board is responsible for stakeholder engagement and relevant stakeholder views and strategic issues are regularly reviewed, clearly
understood and underpin the work of the Board. We consider the views of stakeholders when making decisions regarding strategy,
sustainability, remuneration, CSI and other relevant matters.
Our stakeholder engagement strategy guides interactions with stakeholders. Various engagement channels are utilised, which include:
Electronic channels
Written communication
Direct interaction
Media
• Company website
• Annual Report and
•
In-person meetings
•
•
•
•
Virtual meetings
Email and SMS
communications
Electronic tender platform
Sustainability platform
•
•
Press releases
Interviews
Accounts
• AGMs
•
•
Sustainability Report
TCFD Report
• Quarterly and interim
results statements and
presentations
• Newsletters
•
•
•
•
•
•
Investor roadshows
• Media briefings
Results presentations
Industry conferences
Tenders
Informal interaction
Independent analysis of
community needs
• Community representative
meetings
• Corporate Social
Responsibility Investment
(CSRI) Committee
meetings
The effectiveness of stakeholder engagement in the Group is included in the annual Board evaluation process and personal performance
objectives (that determine short-term incentive bonuses) for Executive Directors include a weighting for strengthening key stakeholder
relationships.
Presenting the Gem Diamonds Annual Report and Accounts 2021 | Strategic report | Performance reviewGovernance | Directors’ report | Financial statements | Report on payments to governments | Additional information2021Gem Diamonds Limited Annual Report and Accounts 18
19
OUR STAKEHOLDER RELATIONSHIPS CONTINUED
OUR STAKEHOLDER RELATIONSHIPS CONTINUED
STAKEHOLDER ENGAGEMENT
Shareholders
Our shareholders include institutional shareholders (63% of shares) and private shareholders (37% of shares). Shareholders are the owners
of the Group, and the Board is ultimately accountable to them for performance. Gem Diamonds’ strategy aims to maximise shareholder
value in a sustainable manner. Shareholders represent a potential source of funding for future expansion opportunities.
The Chairperson, Senior Independent Director and Executive Directors engage regularly with shareholders at requested meetings, during
roadshows to larger investors and at the AGM, which is attended by all Directors. The investor relations function is the responsibility of
the Chief Legal and Commercial Officer. Feedback from these meetings is reported back to the Board at the Board meetings.
Shareholder interests include:
• Growth opportunities.
•
Sustainable returns and capital allocation.
• Cash flow generation and balance sheet strength.
• Corporate governance and ethics.
•
•
•
ESG considerations including climate change and tailings facility management.
Responsible environmental and social practices.
Fair executive remuneration practices.
ENGAGEMENTS POST THE AGM
At the Group AGM in June, Resolution 14 (Authority to allot shares) passed with 71.99% of participating shareholders voting in favour,
while Resolution 15 (The disapplication of pre-emption rights) and Resolution 16 (The further disapplication of pre-emption rights) did
not pass with the proportion of votes against these resolutions exceeding 20%.
The Board is disappointed in the outcome of these votes given that these resolutions followed the provisions of the Pre-Emption Group’s
Statement of Principles for the disapplication of pre-emption rights and reflected UK listed company market practice. In accordance
with Provision 4 of the UK Corporate Governance Code, the Company engaged with the significant shareholder who voted against
these resolutions. This is the second consecutive year that these resolutions were not passed, and due to the standing policy of this
shareholder on these matters, it is unlikely to be resolved. The Board will continue to regularly consider their approach to this matter.
MAJORITY INTEREST IN SHARES
On 15 February 2022, the Company was notified of the following major interests (at or above 3%) in the issued ordinary shares of the
Company in accordance with the DTR 5:
Shareholders
Sustainable Capital Limited
Graff Investments Limited
Lansdowne Partners Limited
Aberforth Partners LLP
Gem Diamonds Holdings Limited
Hosking Partners LLP
Number of ordinary shares
% shareholding
30 469 182
20 861 931
18 677 221
17 187 672
9 325 000
6 209 593
21.9
15.0
13.4
12.3
6.7
4.5
There were no further updates at the date of this report. Changes in major interests in the Company are updated on the Company’s website
as and when they occur. The shareholder base comprises 140.5 million issued ordinary shares of US$0.01 each. There are institutional
shareholders that hold 88.9 million shares (63%) and private shareholders who hold 51.6 million shares (37%).
Employees and contractors
Our strength lies in the quality of our workforce that is instrumental
in running our operations and delivering our strategy. With a
remote mining location and a small pool of local talent, the
retention and development of skills is always a priority. Regular
engagement with our workforce ensure that we understand and
address their needs.
Management engages with the workforce through daily informal
interactions, via the Company’s website and other electronic
channels, and through the quarterly Letšeng newsletter. Visible
field leadership visits and regular ‘toolbox talks’ with smaller shift
teams provide further opportunities for engagement. During
2021, Group and contractor management was often unable to
physically visit the operations due to travel restrictions and had to
use virtual engagement channels.
A 24-hour ‘Stop for Safety’ campaign was held at Letšeng in
June to address and engage with employees and contractors to
understand root causes of the deterioration in safety performance
following an increase in the frequency of safety incidents in H1.
This provided a critical opportunity for employees to engage
directly with senior management and executives. Following
feedback from these engagements, 225 safety interventions were
actioned in 2021. Refer to our safety case study on page 61 for
more details.
is the Board’s
Mazvi Maharasoa, a non-Executive Director,
representative who engages with the broader workforce and
provides direct feedback to the Board on the key concerns
raised. In 2021, she chaired several meetings with employee
representatives. Matters raised during these meetings were
addressed at Board and senior management level and employees
were kept informed throughout the process. In response to
these employee engagements, management adjusted the
communications strategy to include more in-person meetings,
which were felt to be lacking due to COVID-19 social distancing
requirements and restrictions on large gatherings.
Employees and contractors value:
•
Fair treatment and remuneration.
• Health and safety, including safe working conditions
during COVID-19.
• Opportunities for advancement.
•
Skills development.
Key employee projects for 2021
A tailor-made leadership programme was launched at Letšeng
during the last quarter of 2021. The programme focuses on
developing key competencies specific to our operations. In
addition, emphasis was placed on developing skillsets to support
a culture of continuous improvement.
Management trialled a new shift roster and considered how to
change shifts to better meet the needs of employees. The shift
roster was amended to allow for longer off periods for employees
to spend more continuous time with their families.
Management reviewed and amended the Letšeng succession
planning policy. The revised policy was approved in November
2021 and will be implemented in 2022. The main change to the
policy was the introduction of a formal Succession Committee
that will review and monitor compliance to the succession
management policy and guidelines. Notable succession success
stories for 2021 include the local appointments of the Head of
Operations and Head of Finance at Letšeng.
Motooane Thinyane was appointed as the Head of
Operations in March 2021. The appointment followed
his successful career at Letšeng over the previous seven
years as engineering manager. During 2020 he assumed
responsibility for the operation when COVID-19 travel
restrictions impacted the ability of Group management to
travel to site, and successfully led the operation through
this challenging period.
Makhomo Motaung was appointed as Head of Finance
in March 2021. She was first employed at Letšeng in
June 2011 as a financial accountant. She was promoted
to finance manager in 2014 and stepped up to lead the
finance team at the beginning of 2020.
These two appointments mark an important milestone
for Letšeng as all Executive Management positions
are held by Basotho nationals. It is a testament to the
continued focus and dedication to the Group's diversity,
inclusion and localisation policies.
At Letšeng, a full-time psychologist was appointed to assist
employees cope with mental health issues, especially related
to the impact of COVID-19. An employee wellness provider was
appointed to assist employees in the Johannesburg office. Refer
to our case study on how we have responded to the COVID-19
pandemic on pages 82.
The ‘Stop for Safety’ day in June 2021 (refer to page 61) indicated
the need for further engagements to address certain specific
concerns among employees and contractors. Monthly follow-up
sessions were held with employees led by Letšeng management
to provide feedback on the actions taken to address the
concerns raised.
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OUR STAKEHOLDER RELATIONSHIPS CONTINUED
OUR STAKEHOLDER RELATIONSHIPS CONTINUED
Customers
Gem Diamonds’ relationship with its customers supports demand
for its unique diamonds and helps to ensure the best prices
are achieved.
We interact with customers regularly in the normal course of
business, at tenders, and communicate through the Company
website and press releases. Customers also have access to our
electronic tender platform which is used to provide specific
tender-related information.
Customers care about:
• Consistent availability of large, high-quality diamonds.
•
•
•
Regular and transparent tenders.
The ability to participate in tenders safely during COVID-19.
Responsible environmental and social practices.
Six tenders were held in Antwerp in 2021, with the first trial
viewing held in Dubai in September. The response from the Dubai
diamond market was overwhelmingly positive and it made a
significant contribution to the results achieved during this tender.
Refer to page 24 where we describe our participation in the GIA’s
blockchain initiative to link the source of rough diamonds to the
final polished diamonds.
Regulators and government
Mining is a highly regulated industry and the Government of the
Kingdom of Lesotho is a 30% shareholder in Letšeng, the Group’s
flagship mine. It is therefore essential that good relationships
are maintained with these key stakeholders to ensure ongoing
economically sustainable operations.
Engagements with regulators are held as required by relevant
legislation and we interact with government regularly regarding
operational challenges where support is required, employment
and progress on community initiatives, and to support local and
national COVID-19 priorities.
Government and regulator priorities include:
• Health and safety.
• Good governance and ethics.
•
Responsible environmental and social practices.
• Community relationships and investments.
•
Local employment and procurement.
• Contribution to Lesotho gross domestic product (GDP)
through dividends, royalties and tax contributions.
•
Support for government COVID-19 priorities.
Bankers, insurers and funders
Providers of capital allow the Group to invest in capital projects
and expansion opportunities. Insurance enables the transfer of
certain risk elements as part of the Group’s risk mitigation strategy.
Project-affected communities
Letšeng’s PACs play a vital role in the success of the operation and
we are committed to ensuring that these communities develop
and benefit from the operation.
Letšeng’s Community Liaison Officer (CLO) engages with the
surrounding communities, government officials and community
elected representatives. PACs select community representatives
who sit on the CSRI subcommittee of the Letšeng Board,
creating a direct link between communities’ needs and Board
decision-making. In addition to regular community engagement
forums, a grievance mechanism is in place for PAC members to
submit grievances directly to mine management. Social and
environmental
impact assessments and community needs
analyses identify the most pressing community needs and
concerns through consultation processes facilitated through
independent external specialists. The needs and concerns
identified through these independent studies form the foundation
of our CSI strategies and community engagement plans.
Community needs and concerns include:
•
•
•
•
•
Basic infrastructure provision and local economic
development.
Improved access to education, skills development
and healthcare.
Regular engagement with PACs and updates regarding
progress on community projects.
Responsible and safe mining, environmental and
social practices.
Local employment opportunities.
• COVID-19-related support through PPE provision and other
critical aid during the pandemic.
• Operational support in response to climate-related impacts,
such as extreme weather events.
A community needs analysis was conducted during the year. Refer
to the Sustainability Report for further details on our approach to
community engagement and investment.
Letšeng continued to support surrounding communities during
the COVID-19 pandemic, details of which can be found in the
Sustainability Report.
The finance department engages with bankers and funders on
an ongoing basis regarding facilities, compliance with covenants
and debt renegotiations. At each operation, the finance team
interacts with insurance brokering consultants around renewal
anniversaries with oversight from Group risk management.
Providers of finance interests include:
•
•
•
•
Responsible management of the Group’s financial position
to ensure commitments can be met as they fall due.
ESG practices and regulatory compliance.
Effective management of tailings storage facilities.
Transparency in reporting potential material matters in a
timeous manner.
The risk perception of the mining industry by banks, funders and
insurers has increased significantly since the start of COVID-19.
A number of international catastrophic tailings storage facility
failures has also reduced the risk appetite for the mining industry.
This led to tighter lending criteria as well as increased exclusions,
deductibles and premiums on insurance policies which were
further affected by insurance claims due to the civil unrest
experienced in South Africa in July 2021. Aggregate limits are
being imposed on insurance policies and Director and Officer
liability cover is becoming more difficult to secure. Insurers will
likewise be assessing climate change risks in determining whether
to provide cover or adjust premiums for extreme weather risk. The
Group has implemented a new risk transfer strategy to address
these challenges. Refer to page 58 in the CFO review for more
details.
Letšeng submitted a business interruption claim to its insurers
for insured losses arising out of the 30-day COVID-19-related
shutdown period in 2020 when the mine was required by Lesotho
regulations to be placed on care and maintenance. This claim has
been rejected by the insurer and Letšeng intends to pursue the
matter further.
The Group-wide debt refinancing was successfully concluded
with the renewal of the Group’s revolving credit facilities for
an amount of US$77.0 million for a three-year period. US$32.3
million of the facilities are Sustainability-Linked Loans (SLLs)
where the margin and resultant interest rate will decrease if the
Group meets certain carbon reduction and water conservation
key performance indicators (KPIs) that are aligned to the Group’s
sustainability strategy. Refer to page 67 for more information on
how we manage our carbon and water footprints.
Presenting the Gem Diamonds Annual Report and Accounts 2021 | Strategic report | Performance reviewGovernance | Directors’ report | Financial statements | Report on payments to governments | Additional information2021Gem Diamonds Limited Annual Report and Accounts 22
23
OUR STRATEGY
OUR STRATEGY CONTINUED
The goal of our strategy is to maximise stakeholder value in a sustainable manner. It aligns with the Group’s purpose, vision and values,
which provide a broader context to our business activities that emphasises our commitment to creating social benefit and our duty to be
responsible stewards of the natural resources of the countries that we operate in.
The Group strategy is developed by the management team, led by the CEO, and presented to the Board for review and approval. The
strategy is reviewed each year against developments in regulations, governance requirements, current market conditions and the short-,
medium- and long-term outlook. Where necessary, the strategy is revised to adjust for any such developments.
Our three strategic priorities aim to deliver maximum value for all stakeholders:
EXTRACTING MAXIMUM VALUE
FROM OUR OPERATIONS
WORKING RESPONSIBLY AND
MAINTAINING OUR SOCIAL
LICENCE
PREPARING FOR OUR FUTURE
2021 STRATEGY REVIEW
In November 2021, the strategy was reviewed in the context of current macro, industry and operational conditions (including the ongoing
impact of COVID-19 and the climate-related risks and opportunities identified in Phase 1 of the TCFD adoption strategy) and their effect on
the diamond market, industry peers and the Group’s operations. The review included an assessment of various potential opportunities to
create stakeholder value, including technologies and diversification across assets, commodities, industries, business models and operating
structures. We assess both internal and external opportunities on an ongoing basis and engage with stakeholders to investigate compelling
options to unlock value.
Although emerging issues, such as the COVID-19 pandemic, require short-term responses, our medium- to long-term strategic objectives
remain intact and the business model remains effective to support these strategic priorities. Our agility to adjust tactics in the short to
medium term contributes to protecting and preserving long-term fundamentals and strategy.
The Group’s overarching business drivers are set out on page 11, and we aim to control costs while recovering the highest-quality diamonds
to sell as effectively as possible. The short- to medium-term priority remains maximising value from our Letšeng operation through three
main focus areas:
Optimising the current
operating model
We continue to investigate and implement new ways to optimise our operating model to ensure we
are running efficiently and appropriately.
Using early identification and
anti-breakage technology
We are enhancing technology that shows potential to improve diamond recovery, reduce diamond
damage and decrease costs by improving early identification of diamonds within kimberlite and a
non-mechanical method of liberating diamonds from kimberlite.
Reducing diamond damage
Preventing diamond damage from mining and processing activities is a key focus to improve the price
achieved for rough diamonds. This includes continued redesign of blasting patterns as appropriate,
improving the front end of our processing plants and providing stable feed to the concentration
circuits of the plants. A project was successfully completed in 2021 to improve process controls to
ensure plant stability and improve diamond recoveries.
The tables below further define our strategic objectives and links them to relevant KPIs and targets. More information is also included in the
CEO review, page 48, the CFO review, page 52, and the Operations Review, page 60.
1. Extracting maximum value from our operations
What this objective entails
• Optimise operating model
•
•
Reduce diamond damage
Embed a culture of continuous improvement
KPIs related to the objective
Return on average capital employed
Basic earnings per share
• Underlying EBITDA1
•
•
• Cash generated from operating activities
• Ore tonnes treated
• Carats recovered
• >20 carat diamond recoveries
• Average US$ per carat achieved
2021 performance
Our workforce, communities, supply chains and production continued to be negatively impacted by COVID-19. Our Letšeng operation
experienced a number of challenges related to mining and its processing plants during the year. Cash generated from operating activities
amounted to US$71.3 million during the year, resulting in a net cash position at the end of the year of US$20.9 million. The CFO review
on page 52 discusses the Group’s financial performance and position.
The BT four-year target of US$100 million in revenue, productivity and cost savings was exceeded, by the end of the year by achieving
US$110.0 million. The BT programme is discussed on page 65.
Letšeng implemented an improved mine waste dumping strategy during the year that not only reduced hauling distances and related
operating costs per tonne, but also resulted in a measurable reduction in diesel consumption and associated greenhouse gas emissions.
Refer to page 65 for further information on this initiative.
Partnership agreements with strategic manufacturers resulted in Letšeng earning an additional US$0.2 million in the polished uplift on
the sale of these diamonds during the year.
US$ per carat achieved
Underlying EBITDA1 (US$ million)
Return on average capital employed (%)
2 131
1 930
1 908
1 835
1 637
88
21
49
41
53
57
12
14
12
7
2017
2018
2019
2020
2021
2017
2018
2019
2020
2021
2017
2018
2019
2020
2021
Basic earnings per share (BEPS)
(pre-exceptional items) (US cents)
Cash generated from operating activities (US$ million)
Ore tonnes treated (million)
target: 6.1 – 6.3
22.9
138
6.6
5.1
9.8
10.5
97
96
55
71
6.5
6.5
6.7
6.2
5.4
2017
2018
2019
2020
2021
2017
2018
2019
2020
2021
2017
2018
2019
2020
2021
Carats recovered (thousand)
target: 110 – 114
>20 carat recoveries (number of diamonds)
Revenue (US$ million)
120
127
114
115
101
213
257
252
262
267
225
214
182
190
202
2017
2018
2019
2020
2021
2017
2018
2019
2020
2021
2017
2018
2019
2020
2021
1 Refer Note 4, operating profit on page 179, for the definition of non-GAAP measures.
Presenting the Gem Diamonds Annual Report and Accounts 2021 | Strategic report | Performance reviewGovernance | Directors’ report | Financial statements | Report on payments to governments | Additional information2021Gem Diamonds Limited Annual Report and Accounts 24
25
OUR STRATEGY CONTINUED
OUR STRATEGY CONTINUED
2. Working responsibly and maintaining our social licence
3. Preparing for our future
What this objective entails
KPIs related to the objective
What this objective entails
KPIs related to the objective
Promote a culture of zero harm and responsible care
•
• Adoption of six priority UN SDGs:
› No poverty
› Good health and wellbeing
› Clean water and sanitation
› Decent work and economic growth
› Reduced inequalities
› Responsible consumption and production
Participating in the GIA’s blockchain technology initiative
•
Zero fatalities
•
LTIFR1
•
• AIFR1
•
•
• Community investment
•
ISO certifications
Zero major environmental or stakeholder incidents
Sustainability legal compliance
1 Measures the safety performance of the Group (including contractors) and is expressed as a frequency rate per 200 000 man hours
2021 performance
Zero fatalities were recorded during 2021. The Group recorded six LTIs, increasing the Group’s AIFR and LTIFR year on year. Most of the safety
incidents occurred in the first half of the year, which led to a 24-hour ‘Stop for Safety’ campaign being held at Letšeng in June 2021. More
information on the campaign and safety interventions implemented during the second half of the year is provided on page 61.
The COVID-19 Detection and Management Protocol remains in place and has proven extremely effective in ensuring the welfare of
employees, contractors and surrounding communities, and curbing the spread of COVID-19. A focused education and information
campaign resulted in 99% of our workforce being fully vaccinated to date.
There were no major or significant environmental or stakeholder incidents during the year and Letšeng successfully piloted its
bioremediation technology for water treatment. We expanded on the Group’s knowledge around how climate change will affect our
people, operations and PACs. Bolstering our resilience to the physical and transitional impacts of climate change and working with
stakeholders to improve the readiness and resilience of our PACs, ensures that we protect our social licence to operate and continue
to operate responsibly. Improving our resource use efficiencies within the mining value chain, such as energy and water reduces our
environmental footprint and operating costs, and ensures that we continue to operate responsibly and in a sustainable manner.
We continue to invest in local communities and strengthen our relationships with our key stakeholders. Refer to pages 77 and 80 for
more information on our social licence to operate.
Letšeng achieved ISO 14001 and 45001 recertification in July 2021. The Group aligned its tailings facility management code of practice
with the ICMM's GISTM and put the appropriate related governance structures in place to effectively monitor the continued safe and
responsible management of our tailings storage facilities. No incidents of structural instability regarding dam integrity were recorded
during the year. The Group adopted the recommendations of the TCFD and commenced with Phase 1 of the adoption strategy which
worked to establish a science-based foundation for our climate-related risk and opportunity identification process. Refer to page 26 for
our approach to climate change.
The Group submitted 352 rough diamonds to the GIA during the year to undergo its Rough Diamond Analysis Service. The GIA collects
data and images of the rough diamonds and uses individual markers and data identified during the analysis to scientifically match
polished diamonds to its original rough diamond which enables it to confirm the diamond’s original source. This origin information is
indicated on the GIA certificate of the polished diamond which is available to retailers and end-consumers. Available materials include a
brochure and mobile application that trace a diamond’s journey from formation through discovery and mining, polishing and grading,
and describes the beneficial impact of diamonds in a given country. The mobile application also includes report data and images of the
rough and polished diamond. For more information, see https://www.gia.edu/diamond-origin-report-service.
Fatalities
LTIFR
AIFR
1
0
0
0
0
0,30
0,25
0,20
0,15
0,10
0,05
0,00
0.28
0.15
0.04
0.04
0.24
2.02
1.45
0.93
0.93
0.75
2017
2018
2019
2020
2021
2017
2018
2019
2020
2021
2017
2018
2019
2020
2021
• Advance innovative technologies focusing on reducing
• Capital expenditure
diamond damage and reducing costs
• Assess external growth opportunities
•
Long-term mine planning and optimisation
2021 performance
• Waste tonnes mined
•
Extending life of mine
• Mining in accordance with life of mine plan
• Mergers and acquisitions
We continue to investigate technologies for reducing diamond damage and reducing costs. We continually assess external growth
opportunities but did not identify any available assets within the diamond industry that offered compelling value to our shareholders
during the year.
The current Letšeng long-term mine plan was reviewed during the year and a revised mine plan was designed which will be implemented
in 2022. Details of the revised mine plan can be found in the Operations Review on page 60.
A conceptual study on the potential economic viability and mining method for underground expansion of the Satellite pipe at Letšeng
(with the potential to include the Main pipe in the future) commenced during the year. Further and more detailed studies in this regard
will be undertaken in 2022.
During the year, a pilot project was undertaken to test a surface miner on site at Letšeng. The pilot project resulted in c.122 000 tonnes
of ore of varying hardness being mined and treated. The outcome of the test was inconclusive as to its potential positive impact on
diamond damage and recovery, but the consistency and size of the in-pit material mined was encouraging and showed a potential
increase in plant throughput through better fragmented material being fed to the plants. Further evaluation of the various surface miner
designs, operability and total cost of ownership is planned in 2022.
The work undertaken during the year to identify and respond to both physical and transition risks associated with climate change,
ensures that we can appropriately plan for and mitigate the impact of climate change risks on our operations in the future.
Capital expenditure (US$ million)
target: 6 – 8
23
18
10
2
4
Waste tonnes mined (million)
target: 18 – 20
29.7
25.8
24.0
30
25
20
15
10
5
0
18.7
15.6
2017
2018
2019
2020
2021
2017
2018
2019
2020
2021
Presenting the Gem Diamonds Annual Report and Accounts 2021 | Strategic report | Performance reviewGovernance | Directors’ report | Financial statements | Report on payments to governments | Additional information2021Gem Diamonds Limited Annual Report and Accounts 26
27
OUR APPROACH TO CLIMATE CHANGE
OUR APPROACH TO CLIMATE CHANGE CONTINUED
We believe that climate-related issues are intrinsically linked to
creating value for all stakeholders. Therefore, these issues formed
part of the Board’s considerations when reviewing strategy, risk
management, annual budgets and business plans as well as
developing action plans and Group policies. In support of our
existing commitment to sustainability and climate change-
related matters, the Board officially adopted the TCFD framework
in June 2021. It will be implemented over three years.
We are committed to understanding and responding to climate
change in a way that is measured and rooted in science, supports
our business sustainability, and considers the needs of our host
countries and local communities. To this end, we have developed
a TCFD roadmap that outlines our path and allows us to deepen
our understanding and respond effectively.
Our objective is to ensure that our science-based targets and
decarbonisation strategy are established by the end of 2022 and
implementation is scheduled to commence by the end of 2023 in
alignment with our TCFD roadmap below.
investment, sustainable growth,
“Sustainability requires a continuous balance between
capital
reducing the
unavoidable impacts of operational activities and creating
stakeholder value. These considerations are increasingly
integrated into our business and financial planning, which
has enhanced our ability to determine costs and benefits at
an early stage of deliberation.
Our financial performance supports the broader goals of the
business to leave a positive legacy for generations to come in
terms of sustainable corporate social responsibility projects,
responsible environmental stewardship, opportunities for
decent work, skills development, training programmes and
driving forward our six UN SDGs.
Across the industry we have seen an increased interest from
investors in ESG performance, and we’re pleased to be able
to respond by demonstrating both our work over the past
several years and our future planning in this regard.”
–Michael Michael –
–Group CFO –
OUR TCFD ROADMAP
Phase 1 – 2021
Phase 2 – 2022
Phase 3 – 2023
Establish the necessary governance,
strategy and risk foundations to support
meaningful, science-based decision-
making.
Understand the climate-related risks
Gem Diamonds faces to reassess our
organisational resilience.
Monitor and manage our climate-related
exposure and measure against our
decarbonisation targets.
Identify climate-related opportunities
available to the Group and establish clear
metrics and targets for decarbonisation.
In 2022, the Group will embark on the next phase of its TCFD adoption strategy, which will focus on:
• Deepening our understanding of the climate-related risks Gem Diamonds faces.
•
•
Reflecting on the resilience of our strategy, taking into consideration different climate-related scenarios, including a 2°C or lower
scenario.
Establishing climate-related performance targets that will underpin the Group’s decarbonisation strategy.
2021 HIGHLIGHTS
Established robust Board and
management governance
structures.
Strengthened the enterprise risk
management processes to ensure
climate risk is considered and
managed.
Completed the climate change
scenario analysis.
Management
Identified and assessed physical
and transition risks over the short,
medium and long term.
Board and senior leadership
trained in the science behind
climate change and related
studies.
Strengthened the Board’s ESG
skills and experience with the
appointment of Rosalind Kainyah.
GOVERNANCE
How we govern climate-related risks and opportunities
Board
The Board is ultimately responsible for the governance of climate-related risks and opportunities and is supported by the Sustainability
and Audit Committees. The Board embraces a science-based approach to understanding the impact of climate change and continues to
deepen its understanding of the physical and transition risks, along with associated opportunities.
To ensure effective oversight, the Board and Committees received quarterly reports, updates and presentations on climate change-related
matters and the progress made in adopting the recommendations of the TCFD. During 2021, these reports included information on:
•
•
Physical and transition risks.
Resource use performance and efficiencies.
• Carbon tax.
• Carbon footprint reduction opportunities.
• Major project considerations related to climate matters and decarbonisation.
The climate change-related data and performance information presented to the Board and Committees informed the 2021 reviews of
the Group strategy, risk management framework, annual budgets and business plans. The Board and Committees also considered climate
change-related data and performance when setting the Group’s internal KPIs and non-financial personal performance metrics for senior
management.
BOARD
Ultimately responsible for the Group strategy, risk and governance of climate-related
risks and opportunities.
Oversight
AUDIT COMMITTEE
Reviews and monitors matters concerning strategy and governance and reports to
the Board on these issues.
Governance
SUSTAINABILITY COMMITTEE
Reviews matters regarding existing and planned metrics and targets, performance
and operational objectives.
Top-down approach –
sets the risk appetite
and tolerances,
strategic objectives and
accountability for the
management of the
framework
Responsibility
TCFD ADOPTION STEERING COMMITTEE
Management forum responsible for ensuring climate change-related risks and
opportunities are appropriately identified and subsequently elevated through the
established governance and operational structures.
Bottom-up approach –
ensures a sound risk
management process
and establishes formal
reporting structures
The Group’s CFO holds overall accountability for the integration
of climate-related issues into annual budgets and business plans,
financial disclosures and risk management. The Group’s COO
holds overall accountability for sustainability, including climate-
related issues. He is supported by the HSSE and Sustainability
Manager, who is responsible for day-to-day management of
climate-related work within the Group and reporting matters
such as TCFD and the Carbon Disclosure Project (CDP).
“Climate change has become a priority in our planning
from the Board down to operational level, and we start
from the position that efficiencies are necessary not only
to reduce costs and increase revenues, but to reduce our
carbon emissions, mitigate any climate risk and enhance the
sustainability of the business.”
– Michael Michael –
– Group CFO –
Presenting the Gem Diamonds Annual Report and Accounts 2021 | Strategic report | Performance reviewGovernance | Directors’ report | Financial statements | Report on payments to governments | Additional information2021Gem Diamonds Limited Annual Report and Accounts 28
29
OUR APPROACH TO CLIMATE CHANGE CONTINUED
OUR APPROACH TO CLIMATE CHANGE CONTINUED
In June 2021 Gem Diamonds established a TCFD Adoption
Steering Committee, a management forum responsible for
ensuring climate change-related risks and opportunities are
appropriately identified and subsequently elevated through the
established governance structures.
The Committee meets monthly and members include the CFO,
COO, Group Financial Controller and HSSE and Sustainability
Manager. Internal and external attendees are invited to provide
input into the process as appropriate. The TCFD Adoption Steering
Committee drives an integrated approach to climate change by
identifying and assessing climate-related issues through both
internal assessments and external independent studies. In 2021,
the TCFD Adoption Steering Committee commissioned the
following external and independent studies to build the Group’s
climate-related knowledge base:
• Climate Change Scenario Analysis.
• Carbon and water footprints.
•
•
Physical and transition risk assessments.
Scope 1 and 2 carbon footprint reduction opportunity
assessment.
• Materiality assessment.
The TCFD Adoption Steering Committee also worked with the
relevant internal functions to bolster the integration of climate
change considerations throughout the Group, including:
•
Enterprise risk management.
• Communication and reporting.
•
•
•
•
•
Insurance.
Financial planning and disclosure.
Project management.
Internal audit.
Engineering.
• Mining.
•
Treatment.
The TCFD Adoption Steering Committee’s findings are reported to
the Board and the Audit and Sustainability Committees by the HSSE
and Sustainability Manager on a quarterly basis. Reports on existing
and planned metrics and targets, performance and operational
objectives are reported to the Sustainability Committee. At the
same time, the Audit Committee reviews matters concerning
strategy, governance and risk. Both Committees report to the Board
on these issues. In addition, the HSSE and Sustainability Manager
presents to the Board each quarter on emerging climate-related
issues and developments such as carbon tax, regulatory changes
and technological developments.
STRATEGY
The impacts of climate-related risks and opportunities on our business,
strategy and financial planning.
Our strategy aims to sustainably maximise stakeholder value in alignment with its commitment to be responsible stewards of natural
resources. Gem Diamonds identified three strategic priorities, listed below, that underpin how the Group creates maximum value for all
stakeholders. We believe that climate-related issues can affect the Group’s performance within these priorities and impact our business,
strategy, financial planning and performance.
Strategic priority
EXTRACTING MAXIMUM VALUE
FROM OUR OPERATIONS
WORKING RESPONSIBLY AND
MAINTAINING SOCIAL LICENCE
PREPARING FOR OUR FUTURE
Operational initiatives to improve
efficiencies thereby reducing operating
costs and ensuring future availability of
resources for all stakeholders.
Climate considerations
Bolstering our resilience to the physical
impacts of climate change while working
with our PACs to improve their readiness
and resilience, ensures that Gem Diamonds
can protect its social licence to operate
and continue to work responsibly with our
stakeholders.
In 2021, Letšeng implemented an
improved waste rock dumping strategy
that reduced hauling distances and
resulted in a measurable reduction in fossil
fuel consumption, related carbon emissions
and costs. Our integrated approach ensures
alignment between sustainability and
operational objectives. Refer to page 65
for more information on this initiative.
2021 integration
As a result of localised flooding in the
Patiseng valley during the first half of 2021,
water supply infrastructure, access roads and
footbridges in our PACs were swept away.
We rebuilt the damaged infrastructure and
used the findings from our climate change
work findings to design an improved
water supply structure, using borehole and
groundwater systems rather than surface
water. This limits the impact of future
flooding and drought on water supply.
The impact of climate change can already
be seen around the world. The work we
undertook in 2021 to identify and respond to
both physical and transition risks associated
with climate change ensures that we can
appropriately strategise for and mitigate
against the impact of climate change in
our future. The Group’s existing business
continuity and disaster management plans
include considerations for extreme natural
events, which we have responded to since
we started mining in 2006.
While Gem Diamonds is currently in the
foundation phase of its TCFD journey, the
business identified climate-related risks
and opportunities through externally
commissioned studies and internal
assessment processes.
The 2021 Group risk and strategy workshops identified strategic and financial planning processes that should consider climate-related
risks and opportunities over the short, medium and long term. As outlined in the table on the next page, the timeframes adopted by
Gem Diamonds for the short, medium, and long term, align with accepted industry practice and consider the mine lease period for our
operating mine, Letšeng.
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31
OUR APPROACH TO CLIMATE CHANGE CONTINUED
OUR APPROACH TO CLIMATE CHANGE CONTINUED
Our operations are located in remote areas, making them susceptible to more frequent extreme weather events due to climate change. While
we continue to deepen our understanding of the expected physical risks under various scenarios, climate change has already impacted our
operations and forms part of our business continuity planning. For more information on how we are managing and mitigating the impact of
extreme weather events, refer to our environmental section on page 70.
The table below provides a high-level overview of some of the risks and opportunities identified during 2021. Where opportunities for
improvement over the short term were identified, the related processes were enhanced, and the foundations for further integration and
consideration of climate-related issues in 2022 were established.
Climate-related risks
Potential financial impact
Climate-related
opportunities
Potential financial impact
Short term: 1–3 years
Short-term processes include annual business and financial planning, performance reporting, short-term capital and contract negotiations.
Increase in occurrence of
moderate precipitation.
Increased operating costs.
Increased capital investment.
Enhanced emissions reporting
obligations.
Enhanced ESG obligations.
Increased resource efficiencies
and reducing our reliance on
fossil fuels.
Enhanced water use strategies.
Waste reduction and recycling
initiatives.
Reduced operating costs.
Increased capital investment.
Medium term: 3–5 years, long term: 5–10 years
Medium to long-term processes include strategy development, social and environmental management plans, rehabilitation planning,
capital management plans, financing and capital investments and operational planning, including contract negotiations and future-
focused projects.
Increase in occurrence and
severity of precipitation.
Rising mean temperature.
Strong winds.
Increased capital investment.
Increased operating cost.
Reduced revenue from
decreased production capacity.
Increased frequency of and
duration of droughts.
Increased insurance premium
or insurance unavailability.
Failure of electricity providers
to move to a low carbon
economy.
Research, development and
implementation costs of new
technology.
Substitution of technology with
lower emission alternatives.
Inappropriate investment
decisions.
Identify opportunities to
transition to renewable energy
sources.
Reduced exposure to carbon
and fossil fuel pricing.
Increased capital availability.
Position Gem Diamonds as
an ethical and responsible
producer of low carbon
footprint diamonds.
Use of new technologies.
Reputational benefits.
Decreased operating costs.
Increased capital investment.
Social risks due to resource
constraints, particularly in
developing countries.
Evolving regulatory context
regarding carbon tax.
Increased costs of carbon-
intensive products i.e. diesel.
Reputational risk.
Our mining operations require significant amounts of energy, and
Letšeng receives its electricity supply from the South African grid.
Increasing global demand for renewable energy, concerns about
climate change and greenhouse gas (GHG) emissions, actual and
proposed taxation of carbon emissions and limited availability of
alternative energy sources will affect the price and availability of
energy. Higher energy demand in countries that are supplied with
electricity through South Africa and grid instability in South Africa
could increase electricity supply interruptions and associated use
of diesel-powered generators. Greater focus on transitioning the
South African electricity supply sector to renewable energy can
also increase energy supply interruptions. Additionally, changes
in energy laws and regulations in various jurisdictions, such as
taxation on carbon emissions or fossil fuel-based energy, may
impact energy costs and technology available for use. Limitations
on grid electricity supply and increased energy prices could
negatively impact our operating activities, costs, and cash flows.
In line with our TCFD roadmap, in 2022 we will conduct
comprehensive physical and transition risk exposure assessments
and determine the materiality of potential financial impacts on
financial performance and position. This will assist us in indicating
the materiality of the risks in the short, medium and long term, as
well as the Group’s resilience against climate issues, and identify
appropriate mitigation strategies.
“We have historically maintained numerous funding facilities across the Group with varying expiry periods. Although this provides
a degree of flexibility, we decided to consolidate our funding position, and expand on our funding partnerships.
As a result, Firstrand Bank has joined Nedbank and Standard Bank in a consolidated funding facility, which increased our revolving
credit facilities to $77.0 million, in dollar equivalent.
An exciting aspect of the funding is that a portion of the facility is linked to sustainability performance targets. This is a first for our
Group and it clearly marks a milestone in terms of our commitments to ESG and the way ESG commitments are embedded in our
financial models.”
– Michael Michael –
– Group CFO –
UNPACKING OUR CLIMATE
CHANGE SCENARIO ANALYSIS
Understanding climate-related risks and opportunities allows
us to align our business strategy with stakeholder demands
of the industry, enhance sustainability efforts throughout the
organisation, create resilience to the climate change-related
impacts and maximise value for all stakeholders.
During 2021, Gem Diamonds engaged an independent external
expert to conduct an organisation-specific CCSA that considers
a mix of quantitative and qualitative information. Data from
the Carbon Brief and World Bank Climate Change Knowledge
Portal was used to determine climate-related physical impacts
specific to the Group's locations. The current open pit life of
mine for Letšeng was considered in determining appropriate
timeframes in the short, medium and long term.
The Shared Socio-Economic Pathway model is a GHG
concentration trajectory model, adopted by the International
Panel on Climate Change (IPCC) and includes consideration
for 1.4°C, 1.9°C, 3.3°C and 6.0°C temperature increases. The
6.0°C datasets were used as critical information and represent
the world economy in the current format without climate
adaptation and initiatives. These four climate scenarios,
modelled on potential temperature increases by the end
of the century, were included in the Group’s assessment of
physical climate-related impacts.
General circulation models (GCMs), also called global climate
models, which simulate the physics of the climate itself, were
used. These models consider the flows of air and water in
the atmosphere and/or the oceans, as well as the transfer
of heat. The most recent subset of GCMs now incorporate
biogeochemical cycles and can simulate the carbon cycle,
nitrogen cycle, atmospheric chemistry, ocean ecology and
changes in vegetation and land use, which all affect how
the climate responds to human-caused GHG emissions.
An ensemble of GCMs was used to determine our Group
locations' climate-related changes and impacts. To understand
the impact of climate-related events on our mining activity,
we linked climate issues to production impact by considering
factors such as human health and behaviour, water, energy
and vegetation changes. Parameters such as temperature, heat
waves, cold waves, floods, droughts, hurricanes, and storms
directly affect human health and behaviour. Precipitation,
evaporation, drought and wind factors will generally increase
operational challenges and present a resultant risk to the
mining sector.
This research reflects our measured and science-based
approach to understanding the impact of climate change and
will inform the work that will be performed in Phases 2 and 3
of our TCFD roadmap.
Presenting the Gem Diamonds Annual Report and Accounts 2021 | Strategic report | Performance reviewGovernance | Directors’ report | Financial statements | Report on payments to governments | Additional information2021Gem Diamonds Limited Annual Report and Accounts
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33
OUR APPROACH TO CLIMATE CHANGE CONTINUED
OUR APPROACH TO CLIMATE CHANGE CONTINUED
RISK MANAGEMENT
How we identify, assess and manage climate-related risks
Gem Diamonds has a robust risk management process and
framework in place to identify, manage and mitigate current
and emerging risks and uncertainties. Our risk management
framework combines a top-down and bottom-up approach to
ensure appropriate governance and oversight.
The Board is responsible for risk management in the Group,
including climate-related risks, ensuring that all risks are
appropriately identified, assessed, mitigated and monitored.
Risks are assessed and prioritised in terms of potential impact,
probability of occurrence and effectiveness of controls
across short-, medium- and
long-term time frames. The
impact of a specific risk is assessed within the categories of
finance, reputation, regulation, health and safety, climate and
environment, and social and community. A standalone risk
review meeting of the Board is held quarterly to explore all
risks, including climate-related risks, in depth and fully assess
management scenarios and plans.
Our climate-related risks are integrated into the Group’s risk
management framework. In assessing the Group’s principal risks,
the impact of climate change is considered a key element and
impact determinator. Refer to pages 37 to 44 for the Group’s risk
management section.
In 2022, we will undertake an extensive exposure assessment of
climate-related risks to mature our understanding of the potential
impacts and opportunities.
“Our work to understand and mitigate the effects of climate
change is not new, but the degree to which it has been
explicitly embedded into business structures and financial
planning has increased significantly. In particular, to enhance
reporting on the financial and strategic considerations
related to climate change, Gem Diamonds is integrating the
recommendations of the TCFD into the Group’s governance
and risk management structures, strategy and reporting
platforms.
The processes to plan for and deal with the effects of climate
change are therefore increasingly embedded, as are the
results of the CCSA, which allows us to mitigate risk more
effectively. How we implement our investment decisions
and take our decarbonisation and climate change impacts
into account is becoming more sophisticated. However,
it remains a complex and rapidly changing focus area by
its nature.
For example, just two years ago the persistent drought
encouraged discussions around building supplementary
dams to ensure our sustainability from a water-availability
perspective. This year we saw severe rainfall and flooding.
These extremities of weather events are expected to become
more common, which clearly makes forecasting and
budgeting a complex endeavour. We are, however, making
progress on our ability to do so, especially by ensuring
that these considerations are included at the beginning of
planning processes, and involve all affected stakeholders in
the business.”
– Michael Michael –
– Group CFO –
Manage
and
Monitor
Assess
•
•
•
•
The Board has ultimate responsibility for climate-related risk management.
The Audit Committee regularly receives reports on risk, strategy and governance
processes related to climate change and the associated financial disclosures.
The Audit Committee has oversight of climate-related risks and potential
financial, strategy and business planning impacts, through presentations to the
Board during separate quarterly risk meetings.
The Sustainability Committee assures the Board that appropriate systems
are in place to identify and manage climate-related health, safety, social and
environmental impacts.
Top-down approach –
Board
Audit Committee
Sustainability
Committee
• Management, through the TCFD Adoption Steering Committee, assesses the
materiality of climate-related risks identified through the risk identification
process.
•
•
Based on this assessment, a risk management plan is developed and presented
to the Audit and Sustainability Committees and Board for approval.
Emerging and existing regulatory requirements related to climate issues are
monitored and addressed by the Audit and Sustainability Committees of which
the HSSE and Sustainability Manager is an invitee.
• Gem Diamonds has established internal and external processes to identify
climate-related risks.
• Quarterly risk workshops for department heads provide management oversight
of climate-related risks. The outcomes of the risk workshops inform updates to
the Group risk register, these are presented to the Board through the quarterly
risk review meetings.
Identify
• Approved risk management plans are implemented by management at Group
and site level. This is monitored and managed through TCFD Adoption Steering
Committee meetings, quarterly technical reviews, management risk workshops,
quarterly risk reviews, and Committee and Board meetings.
Bottom-up approach –
Management
TCFD Adoption
Steering Committee
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OUR APPROACH TO CLIMATE CHANGE CONTINUED
OUR APPROACH TO CLIMATE CHANGE CONTINUED
TARGETS AND METRICS
The targets and metrics used to assess and manage relevant climate-related
risks and opportunities where such information is material
The Group monitors a wide range of metrics to inform its
assessment of climate-related risks and opportunities. Prior to 2021,
the following metrics and trends were measured and monitored:
• Carbon footprint.
• Water footprint.
•
•
•
•
•
Freshwater dam levels.
Precipitation patterns.
Energy consumption trends.
Environmental expenditure.
Land use and rehabilitation activities.
For information on our GHG emissions, including Scope 1, 2 and
3 emissions, and other climate-related metrics refer to page 35.
In addition to these metrics, we also monitor developments in
areas that may impact our transition risks:
• Current and emerging climate-related regulations.
•
•
Regional renewable energy developments.
Existing and proposed carbon pricing such as carbon tax.
• New technology.
Following the adoption of the TCFD recommendations, we also
track our climate change-related expenditure. In 2021, we spent
US$0.9 million on environmental protection measures and US$0.2
million specifically related to climate change.
Non-financial performance indicators related to climate metrics
are included in Group Executives’ personal performance targets,
Group performance targets and as part of the Group’s annual
incentive plan. Refer to the Remuneration Committee Report on
page 118 for more information.
In 2021, the Group worked on improving the internal KPIs and
targets around climate change. Our internal KPIs aim to improve
resource use efficiencies, reduce our carbon footprint and
advance our water stewardship goals. In line with our Group
sustainability strategy, Gem Diamonds included carbon reduction
and water conservation KPIs in its sustainability-linked loan (SLL).
The interest rate on the SLL decreases if performance targets are
achieved.
In 2022, the Group will embark on the next phase of its TCFD
adoption strategy, which will focus on establishing climate-
related performance targets that will underpin the Group’s
decarbonisation strategy. Gem Diamonds is committed to a
science-based approach to setting targets and metrics. Our
objective is to ensure that our science-based targets and
decarbonisation strategy are implemented by the end of 2023
in alignment with our TCFD adoption roadmap, refer to page 26.
Our carbon, energy and water
footprints
footprint was calculated
CARBON FOOTPRINT
in
The Gem Diamonds carbon
accordance with the GHG Protocol Corporate Accounting
and Reporting Standard, an accounting tool to manage GHG
emissions. The standard was developed through a decade-long
partnership between the World Resources Institute and the World
Business Council for Sustainable Development. It includes IPCC
GHG inventory guidelines for specific heating values, carbon
content, densities and emission factors.
Our carbon footprint was also calculated in accordance with
the International Organisation for Standardisation (ISO) 14064-1
Part 1: Specification with guidance at the organisation level for
quantification and reporting of GHG emissions and removals.
footprint
In 2021, the total carbon
for the Group was
153 864 tonnes of carbon dioxide equivalent (tCo2e) (2020:
135 694 tCo2e). This includes direct GHG emissions (Scope 1),
energy indirect GHG emissions (Scope 2) and material Scope 3
emissions.
In 2020, our Letšeng mine suspended operations from 28 March
to 26 April due to the Lesotho Government’s COVID-19-related
lockdown. During May, operational activities were ramped up
and planned waste mining activities were successfully deferred
to resume in July. This suspension of operations explains the
reduced 2020 carbon footprint. A three-year view of our carbon
emission performance is detailed on the next page.
35
2019
75 359
67 870
143 229
29 739
172 968
Carbon emissions (tCO2e)
Scope 1 (direct) (tCO2e)
Scope 2 (indirect) (tCO2e)
Total Scope 1 and 2 (tCO2e)
Scope 3 (indirect) (tCO2e)
Total Scope 1, 2 and 3 (tCO2e)
2021
62 672
67 473
130 145
23 718
153 864
2020
53 568
61 320
114 888
20 807
135 694
Total tonnes mined (ore and waste)
24 962 356
21 167 606
30 327 114
Ore tonnes treated
6 213 098
5 436 396
6 707 791
Scope 1 and 2 (tCO2e)/Tonnes mined (ore and waste)
Scope 1 and 2 (tCO2e)/Tonne ore treated
0.005
0.021
0.005
0.021
0.005
0.021
The Group's carbon footprint is primarily driven by electricity consumption, and mobile and stationary fuel combustion at Letšeng. Scope
1 emissions made up 41% of the 2021 total carbon footprint. 92% of the Scope 1 emissions are related to mobile combustion activity at
Letšeng with the remainder related to stationary combustion, liquefied petroleum gas and explosives. Scope 2 emissions make up 44% of
Group emissions, driven by grid electricity consumption at Letšeng. Our carbon intensity reporting is based on Scope 1 and 2 emissions.
Less than 1% of the Group’s total CO2 emissions originated from its UK-based office.
ENERGY CONSUMPTION
The Group-wide energy consumption (for Scope 1 and 2 activities) in 2021 was 320 381 029kWh (2020: 278 103 602 kWh). 99% of Scope
1 and 2 energy consumption in 2021 is attributable to Letšeng. Less than 1% of our Scope 1 and 2 energy consumption originated from
our UK-based operations. The COVID-19-related operational suspension of our Letšeng mine during 2020 explains the reduced energy
consumption during 2020. Below is a three-year view of our energy consumption performance.
Our principal energy sources are grid electricity and diesel. Scope 1 energy consumption in 2021 was primarily driven by mobile and
stationary diesel combustion activities at our Letšeng operation. Group-wide Scope 1 energy consumption decreased by 18.7% from 2019
to 2021, resulting in a 9% improvement in our energy efficiency ratio for ore tonnes treated. The energy efficiency improvements are
because on a reduction in waste tonnes, steeper slopes and an optimised mine waste dumping strategy.
Energy consumption (kWh)
2021
2020
2019
Scope 1 (kWh)
Scope 2 (kWh)
251 743 229
215 725 348
309 639 385
68 637 800
62 378 253
69 751 658
Total Scope 1 and 2 (kWh)
320 381 029
278 103 602
379 391 043
Total tonnes mined (ore and waste)
24 962 356
21 167 606
30 327 114
Ore tonnes treated
kWh/Tonnes mined (ore and waste)
kWh/Tonnes ore treated
6 213 098
5 436 396
6 707 791
12.83
51.57
13.14
51.16
12.51
56.56
Our Letšeng operation is located in a remote location, requiring long-distance transmission of power. Scope 2 energy consumption for the
Group is primarily driven by grid electricity consumption at the Letšeng operation. As our operations move towards lower carbon emissions
targets, power sources and technology, our operations will continue to be evaluated to secure stable and cost-effective supply and reduce
our carbon emissions.
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37
OUR APPROACH TO CLIMATE CHANGE CONTINUED
RISK MANAGEMENT
WATER CONSUMPTION
The Group water footprint (net water usage) for 2021 was 7.1 million cubic metres (m3) (2020: 6.0 million m3). The COVID-19-related
operational suspension of our Letšeng mine in 2020 explains the reduced water consumption during the year. Below is a three-year view
of our water consumption performance.
The total volume of water recycled within our production processes increased by 11.3% from 2019 to 2021. This is due to water use
efficiencies in recycling water, seepage from the Patiseng tailings facility and wastewater from the sewerage treatment plant back into the
processing plants.
Water consumption (million m3)
Net water usage
Water withdrawal and capture
Water recycled
Water loss through evaporation, entrainment, and seepage
Total tonnes mined (ore and waste)
Ore tonnes treated
Net water use (m3)/Tonnes mined (ore and waste)
Net water use (m3)/Tonnes ore treated
Recycled water (m3)/Tonnes mined (ore and waste)
Recycled water (m3)/Tonnes ore treated
2021
2020
2019
7.1
3.8
8.9
3.1
24.9
6.2
0.29
1.15
0.36
1.44
6.0
3.5
8.8
3.2
21.1
5.4
0.28
1.11
0.42
1.63
7.6
5.6
7.9
2.7
30.3
6.7
0.25
1.13
0.26
1.18
HOW WE APPROACH RISK
The Group’s risk management framework, which is fully integrated within strategic and operational planning, aims to identify, manage and
mitigate the risks and uncertainties to which the Group is exposed and combines top-down and bottom-up approaches with appropriate
governance and oversight, as shown in the graphic below.
Oversight
Governance
Responsibility
BOARD OF DIRECTORS
The Board is responsible for risk management in the Group and provides stakeholders
with assurance that key risks are properly identified, assessed, mitigated and monitored.
The Board maintains a formal risk management framework for the Group and formally
evaluates the effectiveness of the Group’s risk management process. It confirms that
the process is accurately aligned with the Group’s strategy and performance objectives.
At the quarterly risk review meeting, the Board reviews the risk register, assesses
management’s scenarios and plans, interrogates the most critical risks in detail and
debates mitigating plans with management.
Top-down approach –
sets the risk appetite
and tolerances,
strategic objectives and
accountability for the
management of the
framework
AUDIT COMMITTEE
SUSTAINABILITY COMMITTEE
The Audit Committee monitors the
Group’s risk management processes,
reviews the status of risk management,
and reports to the Board on a biannual
basis. It is responsible for addressing the
corporate governance requirements of
risk management and for monitoring risk
management at each operation.
The Sustainability Committee provides
assurance to the Board that appropriate
systems are in place to identify and
manage health, safety, social and
environmental risks. It monitors the
Group’s performance within these
categories and drives proactive risk
mitigation strategies to secure the safe
and responsible operations and the
social licence to operate in the future.
MANAGEMENT
Management develops, implements, communicates and monitors risk management
processes and integrates them into the Group's day-to-day activities. It identifies risks
affecting the Group, including internal and external, current and emerging risks. It
implements appropriate risk responses consistent with the Group’s risk appetite and
tolerance.
GROUP INTERNAL AUDIT
Group Internal Audit formally reviews the effectiveness of the Group’s risk
management processes. The outputs of risk assessments are used to compile the
strategic three-year rolling and annual internal audit coverage plan and evaluate the
effectiveness of controls.
Bottom-up approach –
ensures a sound risk
management process
and establishes formal
reporting structures
Risk management framework
The Board and its Committees oversee the most relevant and
significant current and emerging risks facing the Group which
include strategic, operational and external risks. These risks
are actively monitored, managed and mitigated to the extent
possible as their impact, individually or collectively, could affect
the Group’s ability to achieve its objectives.
While Gem Diamonds’ risk management framework focuses on
risk identification and mitigation, many factors that give rise to
these risks also offer opportunities. The Group monitors existing
and emerging opportunities and incorporates them into the
strategy where they support the Group’s vision.
The learnings from COVID-19 led to increased emphasis on
identifying the possible implications of external macro risks
and low-probability and high-consequence events to inform
appropriate contingency plans. These risks are mitigated
by building resilience and flexibility into our leadership and
operational processes, and ensuring the Group is equipped to
quickly quantify the size and scale of the emerging issue and
adapt accordingly. Insurance cover plays an important role in
risk mitigation, enabling the transfer of certain risk elements
within the primary risk categories of the Group. While it does
not eliminate the need for operational controls to manage and
mitigate risk, it offsets the financial loss should the risk materialise.
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39
RISK MANAGEMENT CONTINUED
RISK MANAGEMENT CONTINUED
Insurers have continued to decrease their exposure to the mining industry due to the risk perception created by the COVID-19 pandemic,
as well as claims in the industry due to the looting experienced in South Africa in July 2021. As a result, the renewal of appropriate insurance
has become challenging, leading to additional exclusions, reduced cover, increasing deductibles or excesses payable and increasing
premiums. Reduced cover consequently directly impacts the Group’s cash management risk. In response to these challenges, the Group
has decided to adopt a new risk transfer strategy to address the substantial changes in the insurance market by developing a sustainable
insurance solution for the Group in the medium to long term.
3. Diamond
Resources
and
Reserves
Exposure increased
Exposure unchanged
Exposure reduced
1. Climate
Change
2. Diamond
damage
Risk: Climate change-related risks
(transitional and physical risks) are
recognised as top global risks and
investors are increasingly focused
on the management of these
risks. Climate change presents
significant present and future risks
and opportunities to the Group,
that if not identified and managed
responsibly could negatively
impact the organisation’s long-term
resilience.
Opportunity: Opportunities for
improvements in energy and
operational efficiency, innovation
and growth.
Risk: Letšeng’s valuable Type IIa
diamonds are highly susceptible
to damage during the mining
and recovery process. This affects
revenue generated by the Group's
large, high-value diamonds
resulting in reduced cash flow and
profitability.
Related opportunities: Reduction
in diamond damage will result in
higher prices achieved, resulting in
improved cash flow and profitability
Risk Response:
• TCFD adoption and climate change
strategy development.
• Governance and management
practices implemented.
• Structured TCFD Adoption Steering
Risk type: Strategic,
Operational and External
Strategic impact: Preparing
for our future
Working responsibly and
maintaining our social licence
Committee meetings.
Business model impact:
• New reporting standards adopted.
• Adoption of UN SDG framework
• GHG emissions monitoring and
reporting.
Affects the entire business
model
Risk Response:
• Continuous diamond damage
monitoring and analysis to identify
opportunities to reduce diamond
damage.
• Optimising blasting and processing
activities to reduce possible
diamond damage.
• Development of early identification
and improved liberation
technology.
Risk type: Strategic and
Operational
Strategic impact:
Extracting maximum value
from our operations
Preparing for our future
Business model impact:
Reduces financial inputs,
increases diamond prices
realised and output of carats
recovered, increasing financial
outputs
4. Security
of product
Risk: Letšeng’s low-grade orebodies
makes the operation sensitive to
resource variability. Inadequate
information on the geological
continuity, distribution, grade, and
quality of diamonds within the
orebodies increases the risk that
production targets may not be
achieved and reduces confidence
in the performance of the resource.
Unexpected variability in key
resource/reserve criteria, such
as volume, tonnage, grade and
price, can significantly impact the
operation’s forecasting and financial
stability, both in the short and
medium term, and can influence
decisions regarding future growth.
Related opportunity: Having
access to adequately detailed and
reliable exploration, sampling and
testing data enables the operation
to reasonably assume geological,
grade and quality continuity within
defined domains, and improves
planning and forecasting accuracy.
Risk: Theft is an inherent risk in the
diamond industry. The high-value
nature of the product at Letšeng
makes it susceptible to theft and
significant losses, which would
negatively affect revenue and cash
flows.
Related opportunities: Advanced
security control measures increase
employee and product safety and
improves revenue.
Risk Response:
• Gathering geological evidence
on variations within the resource
(lithology, density, volume/tonnage,
grade, diamond population size
and value distributions), applying
industry best practice and engaging
independent experts to audit and
advise.
• Ongoing pit mapping, petrography,
drilling, and 3D modelling.
• Grade control, bulk sampling,
density and moisture content
measurements (on-site and
independent lab verification),
dilution control, stockpile
management, data management,
quality control and internal auditing
of production data (including
geological, processing, recovery and
sales data).
• Managing the Diamond Accounting
System and Mineral Resource
Management (MRM) database,
monitoring recovery data on daily
and monthly basis, as well as per
export period, to follow trends in
diamond distributions, large stone
frequencies and average diamond
prices per kimberlite domain.
Risk Response:
• Zero tolerance on non-
conformance to policy and
regulations.
• Advanced security access control
and surveillance system in
place, complemented by off-site
surveillance.
• Monitoring of security process
effectiveness by the Diamond
Recovery Protection Committee
(subcommittee of the Letšeng
Board).
• Appropriate diamond specie
insurance cover in place.
• Regular vulnerability assessments
complemented by internal and
independent third-party assurance
audits undertaken.
Risk type: External and
Operational
Strategic impact:
Extracting maximum value
from our operations
Preparing for our future
Business model impact:
Affects natural capital
inputs and outputs of carats
recovered. Life of mine affects
the long-term viability of the
business model
Risk type: Strategic and
Operational
Strategic impact:
Extracting maximum value
from our operations
Working responsibly and
maintaining our social licence
Business model impact:
Affects outputs of carats
recovered, which increases
financial outputs. Improves
human capital and safety
outcomes
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40
5. Variability
in cash
generation
6.
Information
Technology (IT)
and
Operational
Technology (OT)
systems, and
cybersecurity
RISK MANAGEMENT CONTINUED
RISK MANAGEMENT CONTINUED
41
Risk: Variability in cash flows from
operational activities and currency
fluctuations can negatively affect
the Group’s ability to effectively
operate, repay debt and fund
capital projects. This risk is directly
impacted by other principal risks
such as rough diamond demand
and prices, diamond damage, and
diamond resources and reserves.
Related opportunities:
Cash constraints drive more
efficient capital allocation and
cost discipline.
Consistent and regular cash flows
provides predictability to maintain
an appropriate capital allocation
strategy.
Risk: The Group’s operations rely
on secure IT and OT systems to
process and record financial and
operating data in its information
management systems. If these
systems are compromised, there
could be a material adverse impact
on the Group.
Related opportunities: Stability
to the business with no production
interruption.
Risk type: External and
Strategic
Strategic impact:
Extracting maximum value
from our operations
Preparing for our future
Business model impact:
Affects funding and financial
capital inputs and outcomes
Risk Response:
• Appropriate treasury management
procedures and framework to
enter into short-term hedging
instruments are implemented to
mitigate the effects of currency
volatility on cash flows.
• Rigorous cost and capital discipline
is in place.
• Funding facilities are in place to
manage any variability in the short
to medium term.
• Ongoing CI programme to drive
operational efficiencies.
Risk Response:
• Application of technical and process
IT controls in line with industry-
accepted standards.
• Appropriate back-up procedures,
firewalls and other appropriate
security applications in place.
• Regular testing of back-up
restorations.
•
IT management policies.
Risk type: Strategic and
Operational
Strategic impact:
Extracting maximum value
from our operations
Preparing for our future
Business model impact:
Affects the entire business
model
Risk Response:
• Appropriate health and safety
Risk type: Strategic and
Operational
policies and practices are in place.
Strategic impact:
Extracting maximum value
from our operations
Working responsibly and
maintaining our social licence
Business model impact:
Affects the entire business
model
• Corrective actions identified from
incident investigations and internal
and external audits implemented
timeously.
• Dam safety management
framework implemented and
alignment with the GISTM.
•
ISO 45001 accreditation maintained.
• Safety management and leadership
programme; detection and
prevention strategies are developed
and implemented.
• Training and awareness campaigns.
• Psychological support
considerations for the full workforce.
• Continually assess organisational
health to address current and
emerging issues.
• Flexible shift configuration to assess
alternatives to limit community
transmission and transfer to the
workplace.
Risk Response:
• Continuous review of business
Risk type: Operational and
External
continuity plans.
Strategic impact:
• Bespoke contract management
role fulfilled to ensure proper
contract management and
minimise potential for disputes and
disruptions.
• Appropriate insurance maintained.
• Appropriate levels of resources
maintained (fuel, stockpiles, etc)
to mitigate certain production
interruptions.
•
Improvements implemented in
the management of contractors’
procurement practices.
Extracting maximum value
from our operations
Working responsibly and
maintaining our social licence
Business model impact:
Reduced operational activity
could lead to a decline in
financial capital and outputs.
Negative outcomes decrease
natural and human capital
7. Health Safety
and Wellness
8. Production
interruption
Risk: The probability of a major
health or safety incident occurring
within the Group is inherent in
mining operations. These incidences
could impact the wellbeing of
employees, PACs, our licence to
operate, the Company’s reputation
and compliance with its mining
lease agreement.
Related opportunities:
Improving employee health and
wellness can increase morale,
reduce absenteeism and improve
productivity.
Effective safety policies and
processes in place reduces risk to
our workforce, strengthens our
relationships with employees and
regulators, and safeguards our
reputation.
Risk: Material mine and/or plant
shutdowns, pit closures or periods
of decreased production could
arise due to various events. These
events could lead to personal injury
or death, environmental impacts,
damage to infrastructure and delays
in mining and processing activities
and could result in financial losses
and possible legal liability.
The Group relies on the use of
external contractors in its mining
and processing activities. Disputes
with these contractors could
materially impact the Group’s
operations.
Related opportunities: Focused
contract management supports
operating at or near steady-state
levels which improves efficiencies
due to stability of production.
Robust business continuity plans
are in place which results in limited
delays due to disruptions.
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42
43
RISK MANAGEMENT CONTINUED
RISK MANAGEMENT CONTINUED
9. Rough
diamond
demand and
prices
10. Creating and
preserving
value for
shareholders
Risk: Numerous factors beyond the
control of the Group may affect the
price and demand for diamonds.
These factors include international
economic and political trends, as
well as consumer trends. Medium-
to long-term demand is forecast
to outpace supply, but short-term
uncertainty and liquidity constraints
within the diamond sector may
affect rough diamond pricing.
Related opportunities: Reduced
supply and increased demand may
result in improved revenue resulting
in positive cash flows
Risk: The volatility of the Group’s
share price and lack of growth
negatively impacts the Group’s
market capitalisation. Constrained
cash flows could impact on returns
to shareholders. The Group currently
relies on a single mine with a finite
life for its revenues, profits and cash
flows.
Related opportunities: Focusing
on existing operations could unlock
further value through rationalisation
and efficiency improvements.
Risk Response:
Risk type: External
• Monitoring of market conditions
Strategic impact:
11. Workforce
Extracting maximum value
from our operations
Preparing for our future
Business model impact:
Affects funding of the business
model, sales and marketing
activities and chosen
distribution channels
and trends.
• Flexibility in sales processes and
utilisation of multiple sales and
marketing channels, and increased
viewing opportunities.
• Ability to enter into partnership
agreements with manufacturers to
share in the upside of the polished
diamonds.
• Maintaining the integrity of the
tender process.
• Reduction in supply in the market
with greater demand for Letšeng
goods caused by current offtake
agreement between a diamond
trader and a competitive mine.
Risk Response:
The Groups strategy review has the
objective of improving the share price
through:
• Continuous Improvement initiatives.
•
Investigating early identification and
anti-breakage technology.
• Assessing mergers and acquisitions
and diversification opportunities.
Risk type: Strategic
Strategic impact:
Working responsibly and
maintaining our social licence
Preparing for our future
Business model impact:
Affects the entire business
model
12. Environmental
Risk type: Strategic and
Operational
Strategic impact:
Extracting maximum value
from our operations
Working responsibly and
maintaining our social licence
Preparing for our future
Business model impact:
Affects human, intellectual and
financial capital inputs into the
business model
Risk type: External and
Operational
Strategic impact:
Extracting maximum value
from our operations
Working responsibly and
maintaining our social licence
Preparing for our future
Business model impact:
Affects natural capital inputs
into the business model and
negative outcomes in the case
of environmental incidents
Risk: Achieving the Group’s
objectives and sustainable growth
depend on the ability to attract
and retain suitably qualified and
experienced key employees.
Gem Diamonds operates in an
environment and industry where
shortages in experience and skills
are prevalent.
Related opportunities: Skills
retention and Continuous
Improvement initiatives build the
Group’s human capital and can
create a competitive advantage.
Risk: Environmental issues are
recognised as top global risks by
the World Economic Forum and
investors are increasingly focused
on environmental performance.
Failure to manage vital natural
resources, environmental
regulations and pressure from
neighbouring communities can
affect the Group’s ability to operate
sustainably.
Related opportunities:
Responsible environmental
stewardship improves relationships
with regulators and communities
while strengthening our brand.
Increased focus on environmental
responsibility could translate into a
competitive advantage.
Risk Response:
• Human resources practices are
designed to identify skills shortages
and implement development
programmes and succession
planning for employees.
•
Incentives are in place to retain key
individuals through performance-
based bonus and long-term share
awards.
• Remuneration practices are in place
which review current remuneration
policies, skills and succession
planning.
• Development of training plans to
address areas where skills shortages
are identified, in conjunction with
government agencies.
Risk Response:
•
Implemented appropriate
Sustainability and Environmental
policies which are subject to a
continuous improvement review.
• The current behaviour-based care
programme instils environmental
stewardship.
• A dam safety management
framework has been implemented.
• Annual social and environmental
management plan audit
programme has been implemented.
•
ISO 14001 accreditation maintained.
• Adopted a UN SDG framework.
• Rehabilitation and closure
management strategy adopted and
updated annually.
•
Implementation of the water
management framework.
• Concurrent rehabilitation strategy
implemented.
• Group shared natural resources
management strategy
implemented.
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45
RISK MANAGEMENT CONTINUED
VIABILITY STATEMENT
Risk Response:
• Appropriate CSI strategy based on
community needs analysis which
provides infrastructure, access
to education and healthcare,
and supports local economic
development.
• Adoption of relevant standards, best
practices and strategies.
• Appropriate Governance structures
across all levels of the Group.
• Regular engagement with
government and regulators.
Risk type: Strategic and
Operational
Strategic impact:
Working responsibly and
maintaining our social licence
Preparing for our future
Business model impact:
Affects social capital and the
viability of the business model
13. Social licence
to operate
Risk: The Group's social licence
to operate is underpinned by
the support of its stakeholders,
particularly employees, regulators,
PACs and society. This support is
an outcome of the way the Group
manages issues such as ethics,
labour practices and sustainability
in our wider environment, as
well as our risk management
and engagement activities with
stakeholders.
Related opportunities: Realising
the Group’s vision to make a
meaningful and sustainable
contribution to the countries
in which we operate builds
the Group's reputation with
employees, government, regulators,
communities and investors.
EMERGING RISKS
The Group risk framework includes an assessment of emerging
risks which are indicators of future conditions from which new
opportunities and threats can arise.
The Group’s consideration of emerging risk includes those risks
that:
•
•
•
are likely to materialise or impact over a longer time frame
than existing risks.
do not have much reference from prior experience.
are likely to be assessed and monitored against vulnerability,
velocity and preparedness when determining likelihood and
impact.
The current emerging risks and opportunities being monitored
by the Group are:
•
•
•
•
•
•
although the invasion of Russia into the Ukraine and
consequential sanctions applied is a current event; the social,
political and economic effect of this on commodity prices,
supply chains and market conditions is unknown.
lab-grown diamonds.
generational shifts in consumer preferences – social
influencers.
the rate of advancement of digital technologies such as
blockchain.
future workforce (automation, skills for the future, etc).
uncertainty around carbon tax.
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
approval of the financial statements to be the most relevant
period for consideration for this assessment, given the Group’s
current position and the potential impact of the principal risks
documented on pages 37 to 44 on the Group’s viability.
While the Group maintains a full business model, based
predominantly on the life of mine plan for Letšeng, the Group’s
annual business and strategic planning process also uses a
three-year time horizon. This process is led by the CEO and
involves all relevant functions including operations, technology
and innovation, 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 and environment in which the Group
operates, even though the life of mine, the mining lease tenure
and available estimated reserves exceed three years.
The business and strategic plan reflects the Directors’ best
estimate of the Group’s prospects. The Directors 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.
REFINANCING OF GROUP
FACILITIES
The refinancing of the Group’s facilities which was completed
in December 2021, significantly increased the Group’s available
facilities from US$67.6 million immediately before the refinancing
to US$83.3 million thereafter, when fully unutilised. US$77.0
million of these facilities mature in December 2024, with the
balance of US$6.3 million being a general banking facility with no
set expiry date, but which is reviewed annually.
1
Refer Note 4, Operating profit on page 179, for the definition of non-GAAP measures.
COVID-19
While there are promising signs that the impact of the COVID-19
pandemic may be dissipating, there remains a potential risk of
further resurgences. The Group is confident in its ability to manage
through any such resurgence given its experience and success to
date, especially following the successful roll-out of vaccinations
at Letšeng. The Group predominantly holds viewings for its rough
tender sales in Antwerp, although viewings have been held in Tel
Aviv and more recently in Dubai. Although international travel has
been subject to changing levels of restrictions, the main diamond
sales market in Antwerp has remained open. Diamond sales
are concluded on Gem Diamonds’ electronic tender platform
which can be accessed from anywhere in the world. The Group is
confident that it will be able to continue to hold tender viewings
in Antwerp despite any potential COVID-19 travel restrictions.
CLIMATE CHANGE
The Board is cognisant of the risks presented by climate
change and conscious of the need to minimise emissions.
A Group-specific climate change scenario analysis has been
conducted whereby the short- to medium- and longer-term
physical and transitional risks were assessed. The short- to
medium-term impacts fall within the viability period. The
physical risks identified for Letšeng, such as drought, strong
winds, extreme precipitation and cold, is 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 combustion-related
fossil fuel use. 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 the uncertainty of 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.
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 tested included the compounding effect of
the factors below and were applied independently of each other.
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47
PERFORMANCE
REVIEW
VIABILITY STATEMENT CONTINUED
Effect
Extent of sensitivity
analysis
Related principal risks
A decrease in forecast rough diamond
revenue from reduced market prices
or production volumes caused by
unforeseen production disruption due to
either COVID-19 restrictions or climate-
related events.
20% •
Rough diamond demand
and prices
•
•
Production interruption
• Diamond damage
• Diamond resources and
reserves
Area of business model
affected
Entire business model ie
inputs, activities, outputs
and outcomes
A strengthening of local currencies to the
US dollar from expected market forecasts.
23% •
Variability in cash
generation
•
Financial capital inputs
and outcomes
CONCLUSION
The Group’s current net cash1 position of US$20.9 million as at 31 December 2021 and available facilities of US$74.3 million would enable it
to withstand the impact of these scenarios over the three-year period. The revolving credit facilities which expire on 22 December 2024, has
a 24-month extension period and the Group will follow all necessary processes to extend the facilities for this available period, as it has in the
past. This position is supported by the cash-generating nature of the Group’s core asset, Letšeng, and its flexibility in adjusting its operating
plans within the normal course of business. Based on the robust assessment of the principal risks, prospects and viability of the Group, the
Board confirms that it has a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall
due over the three-year period ending 31 December 2024.
1
Net cash is calculated as cash and short-term deposits less drawn down bank facilities (excluding asset-based finance facility and insurance premium financing).
2021
Gem Diamonds Limited Annual Report and Accounts 48
49
CHIEF EXECUTIVE’S REVIEW
CHIEF EXECUTIVE’S REVIEW CONTINUED
We performed strongly in 2021 and operated in a safe and responsible
manner to protect the wellbeing of our workforce.
Letšeng has a unique ore body with diamonds that are of the
highest value of any kimberlite mine, and the most beautiful
found anywhere in the world. Despite the many COVID-19-related
challenges encountered during the year, the Group ended the
year in a strong cash position (net cash of US$20.9 million) with
the average price of Letšeng goods exceeding US$2 000 per
carat in Q4. This robust pricing for Letšeng’s large, high-quality
diamonds has continued into 2022.
We aim to extract maximum value for our stakeholders by
operating safely, responsibly and efficiently and exploring new
technologies to reduce diamond damage during the diamond
liberation process. Achieving the highest average prices of any
kimberlite mine in the world requires an effective, transparent
and competitive tender sales process which we boast in Antwerp
and, more recently, in Dubai. In addition, the Group adheres to
internationally recognised systems and processes which provide
our clients and their customers the assurance that our diamonds
are ethically mined.
EXTRACTING MAXIMUM VALUE
FROM OUR OPERATIONS
The strategy during the second year of COVID-19 impact on our
operations focused on driving the extraction of greater value
from our assets.
The Group’s Letšeng operation delivered a solid operating
performance, despite the significant challenges presented by
travel restrictions, supply chain constraints, extreme weather
conditions and intermittent external power outages on site.
Tonnes treated increased 15% year on year as operations
returned to normal after the COVID-19 shutdowns in 2020. Carats
recovered increased 14% to 115 335 (2020: 100 780).
Six diamonds greater than 100 carats were recovered during the
year, which is comparable to the 13-year average of eight, albeit
lower than the 16 such diamonds recovered in 2020. Exceptional
recoveries during the year included the two large high-quality Type
IIa white diamonds of 367 and 245 carats which sold for US$26 160
per carat and US$40 139 per carat, respectively. Letšeng’s
operational performance is discussed in more detail on page 60.
The diamond market has recovered to levels not seen in some
time and demand for the high-quality white diamonds produced
at Letšeng is particularly strong. 21 diamonds sold for more
than US$1 million each, generating revenue of US$64.5 million
(2020: 34 diamonds contributing US$72.6 million). The average
price achieved during the year decreased 4% to US$1 835 per
carat (2020: US$1 908 per carat) from the sale of 109 697 carats
(2020: 99 172). The decrease in the prices achieved compared
“We are committed to
operating in an environmentally
responsible way.”
– Clifford Elphick –
to 2020 relates mainly to fewer large and exceptional diamond
recoveries, and the overall quality of the diamonds recovered as
a result of the areas of the resource mined during the year. The
Group successfully hosted its first trial tender viewing in Dubai
in September, making it easily accessible for important clients
from the UAE, India and Israel to participate in the tender. The
viewings were well-attended and contributed to the robust
prices achieved. The Group will hold its next Dubai viewing in
March 2022.
increased 6% to US$201.9 million
(2020:
Group revenue
US$189.6 million), which translates to underlying EBITDA1
of US$57.4 million and earnings per share of 10.5 US cents.
Operational cash generated amounted to US$71.3 million
resulting in a net cash2 position of US$20.9 million at the end
of 2021. The Group-wide debt refinancing was successfully
concluded during the year. An additional funder joined the lender
group, bringing the total number of lenders to three. The Group’s
revolving credit facilities were increased from US$61.3 million to
US$77.0 million, in dollar equivalent, and renewed for a three-year
period.
Based on the positive financial performance of the Group in 2021,
we are pleased to announce that the Board has proposeed a
dividend of 2.7 US cents per share. More information regarding
the Group’s financial results is included in the CFO review on
page 52.
WORKING RESPONSIBLY AND
MAINTAINING OUR SOCIAL
LICENCE
Gem Diamonds aims to sustain a workplace safety culture
founded on mutual care and collaboration across the workforce.
We continue to roll out programmes to drive a behavioural,
organisational and culture ethos of safe conduct in the workplace.
In the past year, there were no fatalities (2020: none), six LTIs
(2020: 1), and we achieved an overall AIFR of 0.93.
We are committed to operating in an environmentally responsible
way. Our tailings storage facility management process aligns with
the ICMM’s GISTM which ensures the responsible management
and monitoring of the tailings storage and freshwater facilities
with regular inspections by external experts.
infrastructure and stimulate
We invest in our surrounding communities through our well-
established CSI programme to improve educational outcomes,
develop
local enterprises to
create self-sustaining employment independent of the mine.
Implementing these programmes was a significant highlight in
2021 as we were able to successfully implement a number of
2020 projects delayed by the COVID-19 lockdowns, while also
commencing with those projects planned for 2021. In addition,
we were active in repairing roads, footbridges and other PAC
infrastructure damaged by the extraordinary flooding in the
Patiseng valley in the first quarter of the year.
We are particularly proud of the pipeline of in-country mining
skills we have developed that will serve Letšeng, and Lesotho as
a country, well into the future. We started operations with 250
people in 2006, more than half of whom were expatriates. There
are now 1 591 people working at Letšeng, of whom 98% are
Basotho. This is due to our significant investment in transferring
of skills, sponsoring the studies of students in mining and
business-related disciplines, and in coaching initiatives specific
to our needs.
Responsible social and environmentally sourced diamonds are
a consumer priority. We have adopted six of the UN SDGs and
continue to support the GIA’s use of blockchain technology to
assure consumers of our diamonds’ ethical footprint.
There were no major or significant stakeholder incidents reported
during the year.
GEM DIAMONDS’ CONTRIBUTION TO LESOTHO
Jobs for 1 591 employees and contractors of which 98% are Basotho nationals.
Local procurement US$158.7 million.
Local procurement directly from PACs US$3.4 million.
Local procurement from regional communities US$31.4 million.
Investment in training to improve individual skills.
48 bursaries and scholarships for local students.
Vaccine and ambulance donations.
Refer Note 4, Operating profit on page 179, for the definition of non-GAAP (Generally Accepted Accounting Principles) measures.
1
2 Net cash is a non-GAAP measure and calculated as cash and short-term deposits less drawn down bank facilities (excluding the asset-based finance facility and insurance
premium financing).
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CHIEF EXECUTIVE’S REVIEW CONTINUED
CHIEF EXECUTIVE’S REVIEW CONTINUED
OPERATING THROUGH COVID-19
The challenge for our business over the last two years has been
to keep our workforce safe, find ways to run efficiently and
uninterrupted during COVID-19 and generate a return for our
shareholders. We demonstrated our care and agility at the start
of the pandemic by quickly establishing a testing laboratory,
strict controls and protocols, giving confidence to employees,
contractors, communities and the Government of the Kingdom
of Lesotho that we were serious about keeping our people safe.
The Group has incurred significant expenditure in implementing
its COVID-19 protocols with the majority being spent at Letšeng,
where an estimated LSL26.4 million (LSL17 375 per employee)
was spent on COVID-19 management and prevention to date.
When vaccinations started in Lesotho in the second half of
2021, we acquired and donated 20 000 vaccines to the Lesotho
Department of Health. As part of the national vaccination
programme, we worked with the Department of Health to allow
our workforce the opportunity to be vaccinated on site. We are
proud to report that 99% of our workforce is fully vaccinated
to date.
it challenging
throughout 2021. However,
As a result of our early and proactive interventions, the mine
operated continuously
travel
restrictions made
for Group management,
contractors and certain technical skills to access the mine,
and ongoing supply chain disruptions affected the timeous
replenishment of essential spares and equipment. We remain
alert to the effects of the pandemic on mental health and in
response targeted wellness initiatives have been rolled out at the
Johannesburg office and a full-time psychologist was appointed
at Letšeng to support the workforce at the mine.
OUTLOOK
The current strong diamond demand and the ongoing decrease
in the number of diamond producers, suggests that the
fundamentals are supportive for achieving higher diamond prices
in the future. We will prioritise stable and consistent production
while driving efficiencies and managing costs to maximise cash
flows, sustain an appropriate capital return to shareholders and
maintain our status as a responsible, safe and low-cost operation.
Russia's recent invasion of the Ukraine has created political
turmoil and the impact on the global economy, and the diamond
market in particular, is uncertain at this stage.
Our future success depends on ensuring access to the requisite
technical expertise, which will require further investments in
skills development and retention initiatives, as well as effective
succession planning. We remain focused on safeguarding the
health of employees and contractors against COVID-19 for as long
as it persists. We will continue to support our PACs and assist the
Government of the Kingdom of Lesotho in its efforts to manage
the impact of the pandemic.
APPRECIATION
In closing, I thank the Board and our Chairperson for their
leadership during the year. The management teams once again
demonstrated their commitment to the Group, and I thank them
for their exceptional efforts during another difficult year.
We thank our customers for their continued trust and patronage,
and our shareholders for their support. I would like to acknowledge
the Government of the Kingdom of Lesotho for allowing us to
continue to operate in a safe and responsible manner through
three COVID-19 waves during the year.
Clifford Elphick
Chief Executive Officer
16 March 2022
Focusing on climate change
We are cognisant of the risks presented by climate change
and conscious of the need to minimise emissions and our
environmental impact more broadly. Letšeng’s physical
location exposes the operation to extreme weather
conditions including drought, strong wind, heavy rain,
extreme cold and snow. The operation is well set up to
manage these conditions and is experienced in sheltering
and supporting our PACs when necessary.
We held climate change workshops and completed a
Group-specific climate change scenario analysis to deepen
our understanding of climate-related risks and its likely
impacts on the Group. The TCFD framework is proving to
be a useful tool to identify and assess climate change-
related issues.
As users of grid and fossil fuel energy, our short-term
focus is on improving energy efficiencies in our operating
processes and reducing combustion-related fossil fuel
use. We are assessing our options in the context of the
size, nature and location of our operations, the required
investment and the expectations of our main stakeholders.
The Group has appointed
independent external
subject matter experts to provide input into the climate
change considerations that will inform governance, risk
management and strategy decisions as well as climate
change-related targets for the Group. Our approach to
climate change is included on page 26.
PREPARING FOR THE FUTURE
The four-year BT target of US$100 million was exceeded by the end
of the year with the achievement of US$110.0 million, and many
of the embedded initiatives will continue to create value for the
Group. We continue to foster a culture of continuous improvement
to identify and execute value driving initiatives and look forward to
realising the benefits thereof in the near future.
Our capital plans include funding for projects that will sustain
growth and value creation. Advancing technologies to reduce
diamond damage during processing is a focus and while the
potential is clear, the slow pace of progress during the year was
disappointing.
The current open pit mine plan for both Main and Satellite pipes
extends to 2036. In preparing for the future, we are exploring the
trade-off between the next cutback in Satellite pipe versus an earlier
underground access to this ore body in a safe and efficient manner.
To inform our decision in this regard, we deepened our knowledge
of the resource body in 2021 through an extensive resource drilling
programme and will continue this process into 2022.
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53
CHIEF FINANCIAL OFFICER’S REVIEW
Gem Diamonds generated positive cash flow and ended the year in a
strong financial position, proposing a shareholder dividend for the second
consecutive year.
Underlying EBITDA from continuing
operations increased 8% to
US$57.4 million
from US$53.2 million in 2020
Group’s attributable profit:
US$14.8 million
(2020: US$13.6 million)
Earnings per share from continuing operations:
13.2 US cents
(2020: 12.1 US cents)
The Group ended the year in a
net cash position of
US$20.9 million
(2020: US$34.6 million)
Profit attributable to shareholders
from continuing operations:
US$18.5 million
(2020: US$16.9 million)
Unutilised available facilities of
US$74.3 million
(2020: US$60.8 million)
“The successful refinancing of
our facilities, which includes a
sustainability-linked loan, further
embeds our commitment to
delivering the Group’s ESG strategy.”
– Michael Michael –
CHIEF FINANCIAL OFFICER’S REVIEW CONTINUED
Summary of financial performance
Refer to the full annual financial statements starting on page 147.
US$ million
Revenue
Royalty and selling costs
Cost of sales1
COVID-19 costs/standing costs
Corporate expenses
Underlying EBITDA2 from
continuing operations
Depreciation and mining asset
amortisation
Share-based payments
Other income
Foreign exchange gain/(loss)
Net finance costs
Profit before tax from
continuing operations
Income tax expense
Profit for the year from continuing
operations
Non-controlling interests
Attributable profit from
continuing operations
Loss from discontinued operations
Attributable net profit
Earnings per share from continuing
operations (US cents)
Loss per share from discontinued
operations (US cents)
Dividends per share (US cents)
2021
2020
201.9
(21.9)
(113.0)
(0.7)
(8.9)
189.6
(19.8)
(104.7)
(3.9)
(8.0)
57.4
53.2
(8.6)
(0.4)
0.1
1.9
(3.7)
46.7
(15.6)
31.1
(12.6)
18.5
(3.7)
14.8
(9.1)
(0.6)
–
(0.9)
(4.4)
38.2
(10.7)
27.5
(10.6)
16.9
(3.3)
13.6
13.2
12.1
(2.7)
2.7
(2.3)
2.5
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.
We generated another strong set of results and positive cash flows
in 2021, against the backdrop of ongoing COVID-19 challenges. Our
effective and early interventions in response to COVID-19 enabled
operations to continuing uninterrupted throughout 2021, with an
ongoing focus on protecting employees and contractors against
infection whilst maximising production and continues to sell our
diamonds at the highest obtainable market price.
Production throughput was constrained during the year with
three waves of COVID-19 impacting the availability of equipment,
spares, skills and supply chain management. This resulted in the
Group resetting some of its full year production targets, although
the strong performance in Q4 resulted in some of those metrics
being exceeded. The diamond market showed significant
recovery and we achieved US$1 835 per carat for the year.
We successfully concluded the Group-wide debt refinancing
during the year by renewing our revolving credit facilities at an
amount of US$77.0 million for a three-year period. US$32.3 million
of this amount is a Sustainability Linked Loan (SLL) which links the
margin and resultant interest rate on the loans to the Group’s ESG
performance, which is aligned to its sustainability strategy.
In further support of our commitment to sustainability and
climate change-related matters, Phase 1 of our TCFD Adoption
Strategy was concluded during the year by establishing the
necessary foundations to support meaningful, science-based
decision making. The TCFD-related workstreams completed
during 2021 included:
•
•
Establishing robust board and management governance
structures;
Strengthening the enterprise risk management processes
to ensure the full ambit of climate risk are considered and
managed;
• Concluding our climate change scenario analysis; and
•
Identifying, assessing and plotting the impact of our physical
and transition risks over the short-, medium- and long-term.
Underlying EBITDA2 from continuing operations increased to
US$57.4 million, from US$53.2 million in 2020. Profit attributable
to shareholders from continuing operations for the year was
US$18.5 million, equating to earnings per share from continuing
operations of 13.2 US cents on a weighted average number of
shares in issue of 140.3 million.
the year with a cash balance of
The Group ended
US$31.1 million and drawn down facilities of US$10.2 million,
resulting in a net cash position of US$20.9 million (2020: net cash
of US$34.6 million) and unutilised facilities of US$74.3 million.
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CHIEF FINANCIAL OFFICER’S REVIEW CONTINUED
CHIEF FINANCIAL OFFICER’S REVIEW CONTINUED
Revenue
Rough diamond revenue of US$201.3 million was generated at Letšeng, achieving an average price of US$1 835 per carat (2020: US$1 908
per carat). The Group sold 21 diamonds for more than US$1.0 million each, contributing US$64.5 million to revenue.
The Group’s increased revenue was mainly driven by higher volumes through normalised production (following the COVID-19-related
disruptions in 2020) and improved market conditions. The overall dollar per carat achieved was negatively impacted by a decrease in large
diamond recoveries during the year when compared to 2020.
Letšeng entered into partnership arrangements during the year that allows them to share in the margin uplift on the sale of the resultant
polished diamonds. In 2021, additional revenue of US$0.3 million (2020: US$0.6 million) was generated from these partnership arrangements.
Unit cost
per tonne
treated
2021 (LSL)
2020 (LSL)
% change
2021 (US$)
2020 (US$)
% change
Direct
cash
costs1
185.59
185.73
–
12.55
11.28
11
Letšeng Unit Cost Analysis
Third plant
operator costs
Total direct
cash
operating costs
Non-cash
accounting
charges2
Total
operating
cost
15.53
15.73
(1)
1.05
0.95
11
201.12
201.46
–
13.60
12.23
11
70.63
118.74
(41)
4.78
7.21
(33)
271.75
320.20
(15)
18.38
19.44
(5)
Waste cash
costs per
waste tonne
mined
44.44
43.70
2
3.00
2.65
13
US$ million
2021
2020
Group revenue summary
Letšeng sales – rough
Sales – polished margin
Impact of movement in inventory
Group revenue
201.3
0.3
0.3
201.9
189.1
0.6
(0.2)
189.6
Expenditure
OPERATING EXPENDITURE
Group cost of sales increased by 8% to US$113.0 million
from US$104.7 million in 2020. In 2021, the Group incurred
US$0.7 million to manage and maintain protocols to contain
the spread of COVID-19 at its operations (2020: US$1.0 million).
In 2020, an additional US$2.9 million standing charges were
incurred during the shutdown and ramp-up periods at Letšeng.
Total waste-stripping costs amortised increased by 8% to US$46.8
million compared to US$43.4 million in 2020.
Total operating costs in local currency decreased by 4% to
LSL1 677.4 million compared to LSL1 740.8 million in 2020 which
includes the impact of non-cash accounting charges.
The unit cost per tonne treated decreased 15% to LSL271.75
(2020: LSL320.20 per tonne treated) due to more consistent
operational throughputs and an increase in tonnes treated
compared to 2020.
• Direct cash costs (excluding waste) increased by 13% to
LSL1 241.4 million in line with the increase of ore tonnes
treated to 6.2 million, a 15% increase compared to 2020.
Waste cash costs increased by 22% to LSL829.4 million
which was also in line with the 20% increase in waste tonnes
mined (18.7 million tonnes compared to 15.4 million tonnes
in 2020). Direct cash costs per tonne treated of LSL185.59
which is similar to 2020. Waste cash cost per waste tonne
mined increased marginally to LSL44.44 (2020: LSL43.70).
•
Third plant operator costs reflect payments to the
contractor which are calculated from revenue generated by
the sales from diamonds recovered through the contractor
plant. In 2021, the total cash costs in local currency increased
by 12% in line with the increase in carats recovered and sold.
1 Direct cash costs represent all operating costs, excluding royalties and selling costs.
2 Non-cash accounting charges include waste stripping amortised, inventory and ore stockpile adjustments, finance lease costs, and exclude depreciation and mining asset amortisation.
• Non-cash accounting charges: comprise waste
amortisation, stockpile and diamond inventory movements
and finance lease costs. The total impact of these charges
in 2021 was LSL436.0 million compared to LSL645.6 million
in 2020. The decrease is mainly driven by a build-up of ore
stockpile to standard levels as mining activities normalised.
An increase in diamond inventory on hand at year-end of
about 3 500 carats driven by a higher grade mining mix post
the last export of the year, also contributed to the decrease.
Total waste amortisation charges decreased to LSL669.1
million (2020: LSL690.1 million), impacting the unit cost by
LSL108.41 per tonne treated (2020: LSL131.56).
The diesel theft as discussed on page 115 had no material effect
on operating costs or the unit cost per tonne treated.
US-DOLLAR REPORTED COSTS
Gem Diamonds’ revenue is generated in US dollars, while the
majority of operational expenses are incurred in the relevant
local currency in the operational jurisdictions. Local currency
rates for the Lesotho loti (LSL) (pegged to the South African
rand) and Botswana pula (BWP) were stronger against the US
dollar (compared to 2020), which increased the Group’s US
dollar-reported costs and decreased local currency cash flow
generation. The fluctuation of the exchange rates are set out in
the table below:
ROYALTIES AND MARKETING COSTS
In terms of Letšeng’s mining lease, Gem Diamonds pays royalties
to the Government of Lesotho on the value of rough diamonds
sold. The Group’s sales and marketing operation in Belgium
incurs costs relating to diamond selling and marketing. Royalties
and selling costs increased by 11% to US$21.9 million (2020:
US$19.8 million) in line with the increase in revenue.
CORPORATE EXPENSES
The technical and administrative offices in South Africa and head
office in the UK provide expertise in all areas of the business to
realise maximum value from the Group’s assets. Central costs are
incurred in South African rand and British pounds respectively.
Baseline corporate costs were US$8.2 million, a 4% increase
compared to US$7.9 million in 2020. The benefits from the
corporate cost initiatives implemented through BT continue
to be realised. During the year, US$0.7 million in costs were
incurred on ad hoc projects (2020: US$0.1 million), an increase of
US$0.6 million compared to 2020, when all ad hoc projects were
suspended due to COVID-19. Current year costs were impacted
by the stronger South African Rand and British Pound against the
US dollar.
Total expenditure for the year relating to the adoption of TCFD
and CCSA amounted to US$0.2 million.
Exchange rates
2021
2020 % change
Historical corporate costs data (US$ million)
LSL per US$1.00
Average exchange rate
Year end exchange rate
BWP per US$1.00
Average exchange rate
Year end exchange rate
GBP per US$1.00
Average exchange rate
Year end exchange rate
14.79
15.96
11.09
11.76
0.73
0.74
16.47
14.69
11.45
10.80
0.78
0.73
(10)
9
(3)
9
(6)
1
0.2
9.0
0.7
9.3
1.7
7.7
0.1
7.9
0.7
8.2
2017
2018
2019
2020
2021
BASELINE COSTS
PROJECT COSTS
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57
CHIEF FINANCIAL OFFICER’S REVIEW CONTINUED
CHIEF FINANCIAL OFFICER’S REVIEW CONTINUED
CAPITAL EXPENDITURE
The Group’s capital expenditure increased following the cash
preservation focus in 2020. Letšeng’s capital spend was incurred
mainly on the completion of a single-occupancy accommodation
block, the purchase and installation of an additional X-ray sorting
machine, the replacement of an overland conveyor for one of
the tailings storage facilities and expenditure on progressing the
drilling work to develop our Resource and Reserve Statement.
Total capital expenditure (excluding waste stripping) increased to
US$4.0 million during the year (2020: US$1.6 million).
CASH AT HAND
Group cash generated from operating activities (before capital
and waste investment of US$68.7 million) was US$71.3 million.
At year end, cash on hand totalled US$31.1 million (2020:
US$49.8 million), of which US$23.5 million is attributable to Gem
Diamonds. All scheduled capital debt repayments during the
year were made, totalling US$4.0 million. The overall result is a
decrease in net cash of US$13.7 million year on year.
Letšeng declared and paid a dividend of LSL200.0 million
(US$12.5 million) in 2021. Gem Diamonds paid a dividend to its
shareholders of 2.5 US cents per share, totalling US$3.5 million
after approval by the AGM in June 2021.
Underlying EBITDA1 and attributable
profit
Group underlying EBITDA1 from continuing operations increased
by 8% to US$57.4 million (2020: US$53.2 million) as a result of
the increase in revenue. Profit attributable to shareholders was
US$14.8 million, which translates to 10.5 US cents per share based
on a weighted average number of shares in issue of 140.3 million.
Statement of financial position –
selected indicators
US$ million
2021
2020
304 005
5 839
26 741
–
49 820
3 528
293 627
5 373
31 158
1 191
30 913
2 097
(8 340)
(1 702)
(2 704)
(14 385)
(4 100)
(77 355)
(11 202)
–
(4 224)
(78 192)
(12 331)
(11 834)
Property, plant and equipment
Receivables and other assets
Inventory
Income tax receivable
Cash and short-term deposits
Assets held for sale
Non-current: interest-bearing loans and
borrowings
Current: interest-bearing loans and
borrowings
Liabilities associated with assets
held for sale
Deferred tax
Provisions
Income tax payable
Cash movement (US$ million)
115
65
61
50
24
9
8
7
6
4
3
2
2
2
Cash and
facilities
December
2020
Letšeng -
cash
generated by
operations
Letšeng -
waste costs
capitalised
Tax
paid
Net financial
liabilities
repaid
Corporate
costs
Dividends
to NCIs
Working
capital
Investment
in PPE
Dividends to
shareholders
Ghagoo
costs
FCTR
Net
finance
costs
AVAILABLE FACILITIES
74
31
Cash and
facilities
December
2021
1 Underlying EBITDA as defined in Note 4, Operating profit of the notes to the consolidated financial statements.
175
140
105
70
35
0
LOANS AND BORROWINGS
The Group-wide debt refinancing was successfully concluded on
23 December 2021. Letšeng’s LSL500.0 million and Gem Diamonds’
US$30.0 million revolving credit facilities (RCF), that were due to
expire in December 2021, were refinanced for LSL750.0 million
and US$30.0 million respectively, for an initial three-year period.
The facilities were therefore increased from US$61.3 million to
US$77.0 million, in dollar equivalent. Security for the facilities over
Gem Diamonds’ bank accounts and its shareholding in Letšeng
was implemented after year-end.
The funding partners to the new facility agreement are Nedbank,
Standard Bank and new to the Group, Firstrand Bank (through
their respective operations). Nedbank’s portion of the funding,
totalling US$32.3 million, is a Sustainability-Linked Loan (SLL),
which is 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.
Summary of loan facilities as at 31 December 2021
The measurement dates for these KPIs are 31 December 2022 and
31 December 2023.
At year end, the Group had utilised facilities of US$10.2 million,
resulting in a net cash position of US$20.9 million and available
facilities of US$74.3 million, mainly comprising a net debt position
of US$5.5 million (after US$9.0 million drawdown) at Gem
Diamonds and a net cash position of US$24.2 million at Letšeng.
Gem Diamonds ended the year with a US$9.0 million outstanding
balance.
Letšeng made repayments of LSL56.9 million (US$3.8 million)
on its project debt facility for the construction of the mining
workshop complex. The outstanding balance of LSL19.0 million
(US$1.2 million) will be repaid by September 2022.
The Group engages regularly with funders and credit providers
to ensure continued access to funding and to manage cash flow
requirements.
Company
Term/description/
expiry
Gem Diamonds
Limited
Three-and-a-
half-year RCF
Expires
22 December 2024
Lender
Nedbank
Standard Bank
Firstrand Bank
Interest rate1
Facility A
(US$30 million):
LIBOR + 6.5%2
Letšeng Diamonds
Three-year revolving
credit facility
Standard Lesotho
Bank
Expires
22 December 2024
Nedbank Lesotho
First National Bank
of Lesotho
Nedbank
Nedbank
Export Credit
Insurance
Corporation
Nedbank
Letšeng Diamonds
Five-and-a-half-year
project facility
Tranche A: expires
September 2022
Tranche B: expires
March 2022
General banking
facility
Annual review in
March
Letšeng Diamonds
Total
1 At 31 December 2021 LIBOR was 0.08% and JIBAR was 3.89%.
2 Margin will decrease with 1.5% upon implementation of the security condition.
Facility B
(LSL450 million):
Central Bank of
Lesotho rate +
4.75%2
Facility C
(ZAR300 million):
JIBAR + 4.55%2
Tranche A
(LSL35 million)
South African JIBAR
+ 6.75%
Tranche B
(R180 million)
South African JIBAR
+ 3.15%
LSL100 million
South African
prime rate minus
0.7%
Amount
US$ million
Drawn down/
Balance due
US$ million
Available
US$ million
30.0
9.0
21.0
28.2
18.8
2.2
11.3
6.3
96.8
–
–
0.4
0.8
28.2
18.8
–
–
–
10.2
6.3
74.3
2021Presenting the Gem Diamonds Annual Report and Accounts 2021 | Strategic report | Performance reviewGovernance | Directors’ report | Financial statements | Report on payments to governments | Additional informationGem Diamonds Limited Annual Report and Accounts 58
59
CHIEF FINANCIAL OFFICER’S REVIEW CONTINUED
CHIEF FINANCIAL OFFICER’S REVIEW CONTINUED
DISCONTINUED OPERATION
In line with the strategic objective to dispose of non-core assets,
the Board and management remain committed to the sale of the
Ghaghoo diamond mine in Botswana. Following the exclusivity
agreement in the prior year, a binding share sale agreement was
entered into for the sale of the mine in 2021. The agreement
was subject to the fulfilment of certain suspensive conditions,
including obtaining competition authority and regulatory
approvals within Botswana. Prior to year end, the regulatory
conditions were fulfilled and approvals were obtained from the
Botswana Competition Authority. Although the transaction was
not yet concluded by year end, management is pursuing to close
it out as soon as possible.
The operation remains on care and maintenance and is classified
as a discontinued operation and asset held for sale per IFRS 5
Non-current Assets Held for Sale and Discontinued Operations.
Care and maintenance cash and non-cash costs amounted to
US$3.7 million (2020: US$3.3 million) and have been recognised
and disclosed separately in the Consolidated Statement of Profit
or Loss. The increase in costs was mainly due to a non-cash
impairment of redundant stock and spares during the year.
INSURANCE
Letšeng submitted a business interruption claim to its insurers
for insured losses arising out of the 30-day COVID-19-related
Government shutdown period in 2020 when the mine was
required to be placed on care and maintenance. This claim has
been rejected by the insurer and Letšeng has commenced the
process to pursue it further.
Increased risk perception in the mining industry due to the
COVID-19 pandemic and dam wall failures reported by other
companies around the world have led to insurers decreasing
their exposure to the industry. This has resulted in the renewal
of appropriate insurance becoming challenging, leading to
additional exclusions, reduced cover, increasing deductibles
or excesses payable and increasing premiums. In response, the
Group has implemented a new risk transfer strategy to address
the substantial changes in the insurance market by developing
a sustainable insurance solution for the Group in the medium to
long term.
insurance excesses which resulted
The Group assessed its potential maximum risk exposure and its
history of insurance claims as a basis to transition its conventional
approach to insurance cover to a more flexible model by retaining
higher
insurance
premium saving. To mitigate the increased risk exposure of the
higher deductibles in the unlikely event of an unexpected loss,
the Group entered into a five-year Multi-aggregate Protection
Insurance Policy.
in an
SENSITIVITIES
A range of external factors outside of the Group’s control have an
impact on its ability to create financial value. The Group has the
necessary resilience, balance sheet strength and access to funds
to adjust for shifts in these factors. The graph below illustrates the
sensitivity of 2021’s EBITDA to various factors that have the most
significant impact on our ability to create value.
SENSITIVITY IMPACT OF 1% CHANGE
(US$ MILLION)
OUTLOOK
The Group’s focus remains on operational consistency and
cost management to optimise cash flows, which together with
appropriate funding facilities will enable it to meet its operational
and capital requirements.
Michael Michael
Chief Financial Officer
16 March 2022
%
Royalties rate change (absolute)
Average selling price for rough diamonds sold
Operating cost per tonne – direct cash cost
Exchange differences
Diesel price or volume
Corporate expenses
2.0
2.0
0.9
1.1
0.1
0.1
SHARE-BASED PAYMENTS
The share-based payment charge for the year was US$0.4 million
(2020: US$0.6 million). 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. No awards in line with the new GDIP or the
existing Long-Term Incentive Plan (LTIP) were made in 2021.
Dividend
The Board is committed to sustaining shareholder value
through the implementation of appropriate dividend policies
and we aim to pay a dividend when the financial strength
of the Group permits. The Board’s proposed dividend in
March 2021 of 2.5 US cents per share (US$3.5 million) was
approved and paid to shareholders in June.
Based on the Group’s financial performance during the
year, the Board is proposing a dividend of 2.7 US cents per
share (US$3.8 million). The dividend is subject to shareholder
approval at the scheduled AGM on 8 June 2022.
TAXATION
The Group has applied all relevant principles in accordance with
prevailing legislation in assessing its tax obligations. The Group’s
effective tax rate was 33.4%. 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 and permanent differences which are non-deductible
for tax purposes.
As disclosed in the prior year, an amended tax assessment was
issued to Letšeng by the Lesotho Revenue Authority (LRA) in
December 2019, contradicting the application of certain tax
treatments in the current Lesotho Income Tax Act 1993. An
objection to the amended tax assessment was lodged with the
LRA in March 2020, which was supported by the opinion of senior
counsel. The LRA subsequently lodged a court application for
the review and setting aside of the applicable regulations to the
Lesotho High Court pertaining to this matter, which Letšeng is
opposing and a court date is expected to be set in June 2022.
On 7 February 2022 Letšeng received an application from the LRA
to amend its original grounds for the court application. Letšeng’s
counsel continues to review the LRA’s proposed amendment of
its case and has opposed the new application by the LRA. Senior
counsel advice has been obtained for the new circumstances. This
advice still reflects good prospects of success. There has therefore
been no change in the judgement applied and the accounting
treatment for this matter (refer Note 1.2.28, Critical accounting
estimates and judgements for further detail).
2021Presenting the Gem Diamonds Annual Report and Accounts 2021 | Strategic report | Performance reviewGovernance | Directors’ report | Financial statements | Report on payments to governments | Additional informationGem Diamonds Limited Annual Report and Accounts 60
61
OPERATIONS REVIEW
OPERATIONS REVIEW CONTINUED
2021 OVERVIEW
•
•
•
•
•
•
• Highest prices achieved:
Zero fatalities, successful ‘Stop for Safety’ campaign and focus on maturing operational safety culture.
Exceeded BT four-year target, achieving US$110.0 million by 31 December 2021.
99% of workforce fully vaccinated to date.
Improved, adapted, and implemented our COVID-19 protocols and procedures to protect the safety and wellbeing of our people while
continuing operations through three COVID-19 waves in a safe and responsible manner.
Recovered six diamonds greater than 100 carats, including a 367 carat and a 245 carat large high-quality Type IIa white diamonds.
Sold 21 diamonds for over US$1.0 million each, generating revenue of US$64.5 million.
› US$119 886 per carat for a 3.4 carat pink diamond.
› US$47 574 per carat for a 65 carat Type IIa white diamond.
Reduced waste costs by reducing haulage distances for Main pipe waste.
Supported our PACs through COVID-19 and repaired flood-damaged infrastructure.
Fifth consecutive annual ISO 14001 and 45001 certifications.
• Average price of US$1 835 per carat achieved.
•
•
• Group-level climate change scenario analysis completed.
•
• Advanced the resource core drilling programme.
• Completed a preliminary conceptual underground study to evaluate for Satellite pipe.
• Completed designs for the replacement PCA.
•
• New fines X-ray sorting machine to treat fine recovery tailings commissioned.
Enhanced and optimised process control to stabilise plant feed conditions.
•
Initial surface miner trials completed in Q2 and Q3.
•
Successful trial of steeper slopes in Satellite pipe to significantly reduce waste and increase ore availability.
Gem Diamonds Limited Annual Report and Accounts
PERFORMANCE
Safety
The Group's safety approach is founded on our commitment to zero harm and belief that all injuries are preventable. Letšeng recorded
zero fatalities but six LTIs during 2021, resulting in an LTIFR of 0.24 (2020: 0.04) and an AIFR of 0.93 (2020: 0.76). An organisational safety
culture initiative was implemented to advance the maturity of our operational safety practices and reduce the frequency of safety incidents
experienced in H1, through focused interventions including a 24-hour ‘Stop for Safety’ campaign and critical control management.
Safety performance
Unit
H1 2020
H2 2020
FY 2020
H1 2021
H2 2021
FY 2021
Fatalities
LTIs
LTIFR
AIFR
Number
Number
200 000 man hours
200 000 man hours
0
0
0.00
0.33
0
1
0.08
1.07
0
1
0.04
0.76
0
4
0.32
1.29
0
2
0.16
0.57
0
6
0.24
0.93
The safety case study below, outlines the key 2021 safety interventions implemented to mature our safety culture at Letšeng and improve
safety performance.
MATURING OUR ORGANISATIONAL SAFETY CULTURE
journey
Our safety
in 2021 reflects the Group’s deep
commitment to zero harm and the belief that all injuries are
preventable.
During the first half of 2021, Letšeng recorded a series of safety
incidents that led the leadership team taking to shut down
operations for 24 hours for safety-focused engagements with
the entire workforce.
The site-wide ‘Stop for Safety’ campaign was the first
of its kind for the Group and Letšeng and was aimed at
understanding the root causes of increased safety incidents,
reaffirm the commitment to zero harm and to design a
targeted strategy to address the identified root causes and
other concerns raised by the workforce during the intensive
engagements.
This campaign took place on 8 June. Group Executive
Management and Letšeng’s leadership teams, accompanied
by our contractors’ executive and operational management,
engaged extensively with the workforce. An additional
session for employees not on duty on the day was held the
following week.
A comprehensive
list of actions was put together to
immediately address matters raised during these sessions,
which spanned a range of topics, including:
•
•
The continuing impacts of the COVID-19 pandemic.
Fatigue management.
• Health and safety.
• Human resource management and leadership.
As part of the discussions, the workforce requested more
regular employee engagement forums to discuss safety and
other matters, and as such, monthly employee engagement
sessions were established.
Following the ‘Stop for Safety’, we appointed external
safety specialists to review our safety practices and identify
opportunities for improvement. In support of this process, a
safety perception survey was conducted in October to map the
Group’s current safety maturity level. The findings of the safety
perception survey informed a safety-focused response plan
to implement strategic programmes that aim to develop and
mature safety practices and organisational culture at Letšeng.
The strategic safety programmes initiated in 2021 include:
• Critical control management.
•
•
•
Incident investigation and management.
Safety-focused leadership coaching.
Just Culture Model development.
In addition to the above programmes, we are maturing from
reacting to lagging indicators, which measure failures post-
incident to leading indicators that measure performance and
indicate whether safety and health controls are effective at
managing safety risk, thus being more proactive in our safety
strategy. This approach will be monitored and measured
through a leading indicator safety committee that will meet
monthly to conduct retrospective analysis of all the leading
indicators to identify trends or potential red flags to allow a
proactive response.
We recognise that with one operating mine, there is limited
opportunity for cross-operational knowledge sharing and
we have identified a need for external assistance to transfer
knowledge, experience and expertise on safety-related
matters. We have constituted a committee of experienced
individuals, our ‘Grey Hair Council’, from a broad industry
base with deep insight into industry leading safety practices.
In 2021, this council provided valuable guidance and insights
into actual safety incidents, which have been integrated into
our safety response and management plans.
We remain committed to zero harm and continue to look for
innovative ways to deepen our understanding of how we can
keep ourselves and our teams safe.
2021Presenting the Gem Diamonds Annual Report and Accounts 2021 | Strategic report | Performance reviewGovernance | Directors’ report | Financial statements | Report on payments to governments | Additional information
62
63
OPERATIONS REVIEW CONTINUED
OPERATIONS REVIEW CONTINUED
Operations
KPI
Ore mined
Ore treated
Carats recovered1
Carats sold
Average price per carat
Unit
tonnes
tonnes
carats
carats
US$/carat
2021
2020
% change
6 298 863
6 213 098
115 335
109 697
1 835
5 594 639
5 436 396
100 780
99 172
1 908
13
12
14
11
(4)
1
Includes carats produced from the Letšeng plants, the Alluvial Ventures plant and the tailings treatment plant.
The Group’s Letšeng operation continued operating safely and
responsibly throughout the year notwithstanding the ongoing
impact of COVID-19 on the availability of spares and equipment,
limited access to skills and services due to travel restrictions
and supply chain disruptions, and lost shifts due to required
quarantining. Fatigue and mental health challenges placed
significant strain on the management and the workforce.
Waste tonnes mined increased 20% to 18.7 million tonnes from
15.6 million tonnes in 2020 (2020 being impacted by the 30-day
COVID-19 shutdown).
The trial to further steepen the west side of the Satellite pipe was
safely and successfully managed during the year, with blasting
and berm retention controls well entrenched. A similar slope
steepening programme is planned for the final cutbacks in the
Main pit. This will significantly reduce waste volumes and related
costs, and expose more ore over the life of the Main pipe open pit.
Ore mined in 2021 of 6.3 million tonnes (2020: 5.6 million tonnes)
was in line with the requirements of the plants and stockpile
management.
Although a successful year overall, the Letšeng operations
experienced many challenges during the year, including:
•
Intermittent Main pit closures due largely to extreme weather
conditions and spillage caused by the split-shell mining
method as one cutback is completed while the next starts.
•
Regional power grid instability and unplanned power cuts.
• A breakdown of the primary jaw crusher at the end of the
third quarter.
• Unscheduled and extended maintenance of critical plant
equipment.
Ore treated during 2021 of 6.2 million tonnes (2020: 5.4 million
tonnes) comprised 5.2 million tonnes treated by Letšeng’s plants
(2020: 4.5 million) and 1.0 million tonnes treated by Alluvial
Ventures, the third-party processing contractor (2020: 0.9 million).
Of the total ore treated, 2.7 million was sourced from the Main
pipe, 3.3 million from the Satellite pipe with 0.2 million tonnes
treated from the Main pipe stockpiles.
During the year we reduced the PCA throughput to ensure
the longevity of our current PCA while the construction of the
replacement PCA commences in 2022 and for commissioning
in 2023. The new PCA comprises a twin module design with a
combined throughput of c.1 000 tonnes/hour.
Total carats recovered in 2021 increased 14% to 115 335 carats
(2020: 100 780 carats). Carats recovered increased by 1% when
compared to 2019, which was a more comparable year not
impacted by COVID-19.
The BT initiative to re-treat historic and current recovery tailings
through the mobile X-ray transmission sorting machine recovered
1 098 carats in 2021 (2020:1 341 carats). An additional 213 carats
were recovered by the new fines X-ray sorting machine that was
installed and commissioned in H2 with expected full production
in H1 2022.
Overall grade for 2021 was 1.85cpht which is aligned with 2020
and in line with the expected reserve grade. The contribution
from Satellite pipe material accounted for 54% of all material
treated during the year (2020: 52%).
Revised Mine Plan
Following the change in design of the Satellite pit, resulting in the
successful implementation of steeper slopes in 2019, and further
steepening and pit design optimisation over the last three years,
more ore has been exposed. This has resulted in the availability of
ore from the Satellite pipe extending late into 2025, compared to
the 2019 plan where it was depleted in mid-2023. This has allowed
the commencement of the waste stripping related to the next
cutback (Cut 6 West / C6W) of the Satellite pit to be delayed to 2024.
In 2021, a preliminary conceptual study of an early-access
underground in the Satellite pit was completed. An underground
feasibility study will be commissioned in 2022 to assess the viability
of an earlier shift to underground mining of the Satellite pipe and to
evaluate the trade-off between this and C6W. The trade-off analysis
between C6W and underground mining of the Satellite pit will be
completed in 2023.
Our long-term mine plan has been revised accordingly to
commence waste stripping related to C6W in 2024, previously
2022. At this rate of waste stripping, Satellite ore from C6W will
be available from 2029. Pending the outcome of the proposed
underground feasibility study, Satellite C6W cutback may be
replaced by the early commencement of underground mining
with the intention of bringing forward access to Satellite ore post
the completion of Satellite Cut 5 West in 2025.
The waste mining profile for the next two years has therefore
been reduced to an estimated 11.0 million and 11.6 million
tonnes respectively. At this rate of waste stripping, Satellite ore
from C6W will be available from 2029.
LoM Ore Waste Profile Incl. Deferred SC6W at 3Mtpa
30 000 000
25 000 000
20 000 000
15 000 000
10 000 000
I
t
–
D
E
N
M
E
T
S
A
W
5 000 000
0
t
–
D
E
N
M
E
R
O
I
8 000 000
7 000 000
6 000 000
5 000 000
4 000 000
3 000 000
2 000 000
1 000 000
0
2022
2022
2023
2023
2024
2024
2025
2025
2026
2026
2027
2027
2028
2028
2029
2029
2030
2030
2031
2031
2032
2032
2033
2033
2034
2034
2035
2035
2036
2036
MAIN PIT WASTE
SATELLITE PIT WASTE
SATELLITE PIPE ORE
MAIN PIPE ORE
Large diamond recoveries
In 2021 Letšeng recovered six diamonds greater than 100 carats and total diamonds recovered greater than 10 carats increased by 4%
year on year, mostly in the 10 to 20 carat size category. Although recoveries throughout the categories are mostly in line with the 13-year
averages, the lower number of diamonds in the large categories (60 to 100 carats and greater than 100 carats) can be primarily attributed to
the areas of the resource that were mined in 2021 versus what was mined in 2020. 2020 was a record year for these two categories of larger
diamonds. A total of 122 greater than 100 carat diamonds have been recovered at Letšeng since 2006.
Number of large diamond recoveries
> 100 carats
60 – 100 carats
30 – 60 carats
20 – 30 carats
10 – 20 carats
Total diamonds > 10 carats
2021
2020
FY average
2008-2020
6
16
81
122
570
795
16
29
102
115
500
762
8
19
76
114
433
650
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65
OPERATIONS REVIEW CONTINUED
OPERATIONS REVIEW CONTINUED
Letšeng 60 – 100 and +100 carat diamonds
29
21
21
22
20
19
15
15
16
16
11
9
11
7
5
6
30
25
20
15
10
5
0
17
6
2013
2014
2015
2016
2017
2018
2019
2020
2021
+100 CARAT DIAMONDS
60 – 100 CARAT DIAMONDS
Mineral resources and reserves
A primary focus in 2021 was advancing the resource core drilling
programme in the Main and Satellite pipes, using the new drill
rig purchased at the end of 2020. As the new drilling crews
and management systems were embedded, the number of
shifts increased, and the drilling process accelerated. The main
challenge facing demarcated drilling programme remains the
competition with production activities for access to the drilling
sites, which were all positioned in the pits. Although completion
of the core drilling programme was a high priority, continued
production activities remained paramount.
Resource drilling in the Satellite pipe progressed well and nine
delineation drillholes were completed. The kimberlite contact of
the Satellite pipe along the western wall deviated out slightly from
the expected position at the current mining elevation and posed
certain geotechnical risks. A series of 19 additional holes were
drilled for geotechnical purposes at intervals along the length of
the western wall to resolve the immediate risk to the mine design
and pit wall stability. These drillholes detected an increase in the
pipe margin, adding further ore to the resource base of Satellite
pipe. Detailed petrography of the core is in progress and updated
geological models are expected by mid-2022.
Resource drilling in the Main pipe proved more difficult, with
ground conditions hampering drilling progress and resulting
in several holes having to be abandoned and redrilled. Delays
experienced related to excessive rainfall and the commencement
of mining activities on the upper benches in the new cutback (Cut
4 East), creating unsafe working conditions for the drilling crews
below and periodically restricting access to the drilling sites.
Two additional contractor drill rigs were brought to site to
reduce the impact on the timeline for completion of the
drilling programme and updating of the Resource and Reserve
Statement. By year end, the objectives of the drilling programme
in Satellite pipe had been met and only four of the 14 planned
drillholes in Main pipe remained to be completed.
Diamond sales
Six rough diamond tender viewings were held in Antwerp and a
first trial tender viewing was held in Dubai in September. Travel
and other COVID-19-related restrictions had little impact on
attendance at the tender viewings and demand remained strong
throughout the year.
A total of 109 697 carats were sold in 2021 (2020: 99 172) and
Letšeng generated rough diamond revenue of US$201.3 million
(2020: US$189.2 million), at an average price of US$1 835 per carat
(2020: US$1 908).
The Group supports the GIA’s blockchain technology to inform
and assure consumers about the ethical and socially supportive
footprint of
the diamonds being purchased. Blockchain
technology can link the source of rough diamonds to the final
polished diamonds, proving their authenticity, provenance and
traceability, and supporting ethical sourcing and processing in
the diamond value chain.
Capital projects
Although limited, capital was appropriately spent during 2021 in
line with operational requirements. Certain capital was deferred
into 2022 without putting the continuation of operations at risk.
A number of key capital projects are planned for 2022, including
the replacement of the PCA, the completion of the resource core
drilling programme to inform Letšeng’s Resource and Reserve
Statement, the construction of the bioremediation plant, further
evaluation of the underground development opportunities and
expansion of the Patiseng coarse tailings storage facility. Details of
overall costs and capital expenditure incurred at Letšeng during
the year are included in the CFO review on pages 52 to 59.
Business Transformation
The Group’s BT programme concluded at the end of 2021,
exceeding the targeted US$100 million1 in revenue, productivity
and cost savings (against the 2017 base) by achieving a total of
US$110.0 million, as set out below. The programme identified 325
initiatives to create a step change in efficiency, productivity and
cost management, and to position Gem Diamonds favourably in
its peer group.
BT programme annual cash saving (US$ million)
Cumulative saving
21
2
1
13
5
2018
55
3
2
12
79
110
4
2
4
4
3
2
17
2019
16
2020
21
2021
MINING
PROCESSING
WORKING CAPITAL AND OVERHEADS
CORPORATE ACTIVITIES
The targeted US$100 million comprised US$7.1 million
in
once-off savings and US$103.0 million in cumulative recurring
annualised benefits over four primary workstreams – mining,
processing, working capital and overheads, and corporate
activities. The implemented initiatives are sustainably embedded
in the operation and continue to deliver benefits in reduced costs
and improved efficiencies that have been critical in maximising
operational cash flows, which was crucial in the Group’s ability to
successfully absorb the external shock of the COVID-19 pandemic.
Continuous Improvement
The CI programme aims to implement behavioural strategies
and meaningful KPIs to create effective visual management tools
and problem solving at all levels. The CI methodology, supported
by training and coaching, enables the Group to continuously
improve efficiencies by unlocking the
inherent capabilities
of employees at all levels to implement best practices, build
effective teams and drive incremental improvements. Although
severely hampered by COVID-19 restrictions and constraints, CI
was successfully implemented in Mining at Letšeng in 2020, with
the roll-out to the Treatment and Services areas commencing in
2021. In 2022, the programme will focus on training and focused
coaching to improve skills and experience at the supervisory level.
A key strategic objective for the Group is to continuously
identify opportunities to unlock value within our business.
During 2021, we focused on continuous improvement
opportunities
reduce mining-related costs and
improve resource use efficiencies. At Letšeng, waste
hauling distance is a major driver of both current and
future mining costs and fossil fuel combustion-related
greenhouse gas emissions.
to
We identified an opportunity to reduce both mining
costs and greenhouse gas emissions through shorter
mining waste haulage distances of our waste from the
Main pit. Following extensive collaboration between our
environmental and mining teams, a new mine waste
dumping plan was designed and implemented. The
revised plan has reduced the haulage distance of waste
from the Main pit by 30%, resulting in a significant long-
term reduction of the associated operational costs and
diesel consumption, and advancing our sustainability
objectives to lower carbon emissions.
By working together to design innovative solutions, we
are able to unlock shared value and drive Group goals
with regards to maximising value, managing costs and
reducing our environmental footprint.
1 The target is stated net of implementation costs, consultant fees and an employee incentive plan that rewarded the successful delivery of initiatives contributing to the overall target.
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OPERATIONS REVIEW CONTINUED
SUSTAINABILITY
Dam safety and integrity
Letšeng has three dams on site – (i) the Patiseng tailings storage
facility, which is currently in use for the deposition of coarse
tailings and fine tailings, (ii) the Old Tailings Storage Facility, which
is sporadically used for fine tailings deposition, and (iii) the Mothusi
Dam, which is the mine’s freshwater supply resource. Letšeng’s
dams were constructed using the ‘centre line and downstream
tipping’ method1, which is a safer method of construction than
the ‘upstream’ construction methods used in most recent dam
failures reported in the mining industry.
We have aligned our tailings dam failures in the mining industry
have shown the severe adverse impact these can have on
human lives and the natural environment. Tailings dam integrity
is consequently an ongoing area of significant focus for mining
companies and investors.
The Group has aligned its tailings storage facility management code
of practice to that of the ICMM’s GISTM and established appropriate
governance structures at both operational and Group levels to
provide oversight and assurance of continued safe and responsible
management of our tailings storage facilities. The relevant details
of Letšeng’s tailings storage facilities are available in our voluntary
disclosure as part of the Investor Mining and Tailings Safety initiative
set up by the Church of England, which can be found under the
Company’s name at http://tailing.grida.no/. Further information is
available on page 78.
Preventing diamond damage
The large high-value Type II diamonds in Letšeng’s orebody are
more susceptible to damage through the mining and treatment
processes. Diamond damage negatively impacts the value and
in turn the sales prices realised for these diamonds. Reducing
damage to these diamonds provides an important opportunity
to significantly enhance revenue.
Our main focus in this regard has been on identifying, validating
and testing technologies from various industries that show
potential to identify diamonds within kimberlite at an early stage
and liberate these using non-mechanical means. In 2019, the
Group’s wholly owned subsidiary, Gem Diamonds Innovation
Solutions, constructed and commissioned a pilot plant at Letšeng
to test this technology under operating conditions. Progress on
the detection components of this pilot plant has been limited to
the development of the detection and ejection algorithms and
further development is required to enhance this technology. The
materials handling component of the pilot plant now forms part
of Letšeng’s new fines XRT system that was commissioned in H2
of 2021.
Sale of Ghaghoo
A binding share sale agreement was entered into for the sale of
the Ghaghoo diamond mine in Botswana to Okwa Diamonds Pty
Ltd, an entity owned by Vast Resources PLC (Vast) and Botswana
Diamonds PLC (BOD). The agreement is subject to the fulfilment
of certain suspensive conditions
including obtaining the
competition authority and regulatory approvals within Botswana.
Regulatory conditions have been fulfilled and written approvals
have been obtained from the Botswana Competition Authority
and, in December 2021, the Ministry of Mineral Resources, Green
Technology and Energy Security of Botswana. However, the
completion date for the transaction has been extended by two
months to 31 March 2022 to allow BOD to secure an alternative
financing partner to replace Vast.
OUR PLANS FOR 2022
A pre-evaluation of the feasibility of an earlier shift to underground
operation will start early in 2022 and the replacement of the PCA
will commence in the first half of the year. The contract with
Alluvial Ventures, which runs the third processing plant, expired at
the end of 2021 and has been extended to 30 June 2022. We are
currently evaluating several options for a replacement 1.0 to 1.2
million tonne per annum XRT plant. Work continues to steepen
slopes to optimise the mining plan for Main pipe and we will
begin planning for the tailings extension at Patiseng. A number
of other projects are planned to optimise mining efficiencies,
improve production, decrease costs and reduce emissions in line
with our commitment to decarbonisation.
1
A discussion of the construction and applicability of the various types of tailings facilities is available on the International Council of Mining and Metals website at
www.icmm.com/en-gb/environment/tailings.
MATERIAL MATTERS
Our material matters are topics that directly or indirectly impact our ability to create or preserve economic, environmental and social
value for our organisation, our stakeholders and society at large. Therefore, material matters include risks that must be managed and
opportunities that could be captured to enhance the viability of the business in the short, medium and long term.
How we determine materiality
A list of possible material matters was developed following a detailed materiality review, which considered internal and external research.
This year we used a double materiality lens, prioritising our material matters in terms of their impact on our financial and operational
performance as well as their impact on society, communities and the environment.
Conduct a thorough
review of the
external
operating context
+
Conduct a detailed
review of the
internal operating
environment
and business
performance
+
Prioritise and verify
identified material
matters
=
Report against our
identified material
matters
INPUTS
• Global operating context
• Global risk registers
•
•
•
•
Industry research
Peer reports
Review material risks
Review prior material matters
• UN SDGs
•
Internal documentation
• Media releases
•
Financial results
• An online survey to rank material
matters was circulated to the Board and
employees across the operations
•
The approved matters form the basis
of our sustainability reporting.
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SUSTAINABILITY CONTINUED
SUSTAINABILITY CONTINUED
Results for all material matters
4
3
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n
a
l
a
i
c
n
a
n
i
f
’
s
d
n
o
m
a
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e
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n
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e
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2
2
LABELS
P
S
T
R
U
Q
FG
Y
H
V
I
N
K
A
W
X
E
C
L
D
B
O
M
J
3
4
Impact on society, communities and environment
Financial and operational
Social
A Maintaining a strong revenue stream and
P
Safeguarding our communities
managing costs
B Enhancing balance sheet strength
C Protecting the premium brand of
diamonds
D Ensuring product security
E Managing and mitigating macro socio and
economic risks
Q Ensuring positive engagement with our
stakeholders
R Minimising our potentially negative social
impact
S Working with communities to understand
and meet their needs
T
Supporting our communities through
localisation to create shared value
Governance and ethics
Environment
F
Implementing effective ESG strategies,
which are managed at Board level
U Managing our environmental footprints
V Managing and addressing climate change
G Prioritising business integrity
and extreme natural events
H Ensuring transparent governance and
W Protecting biodiversity and enhancing
remuneration practices
conservation
I
Ensuring legal, regulatory and governance
excellence
X Ensuring consistent electricity supply and
minimising energy consumption
J
Raising standards across the pipeline
Y Planning for mine closure
Employees
K Providing a safe working environment
L Attracting and retaining qualified people
M Providing skills development opportunities
for employees
N Ensuring our employees remain healthy
O Engaging with employees and elected
representatives
WORKING TOWARDS GLOBAL GOALS
We are embedding material United Nations (UN) Sustainable Development Goals (SDGs) in the Group’s systems and processes while
we implement the recommendations of the TCFD to ensure we create sustainable value for our stakeholders.
In accordance with our sustainability strategy, we have started with the following six UN SDGs, to be implemented over a three-year
rolling cycle, as this is a manageable and achievable target with widespread impact.
No poverty
Good health and
wellbeing
Clean water and
sanitation
Decent work and
economic growth
Reduced
inequalities
Responsible
consumption and
production
2020
2021
2022
Perform a gap analysis to
evaluate alignment with each
UN SDG
Focus on addressing any
shortfalls identified in the first
year and further strengthen
achievements
Evaluate the success of those
measures to ensure their
sustainable application
The interconnectedness of value creation
Across the business, we are focusing on practical and implementable measures to deliver maximum value for stakeholders.
Three key priorities support our strategy in delivering maximum value for stakeholders:
Extracting maximum value from
our operations
Business integrity
Organisational health and safety
Advancing our people
Working responsibly and
maintaining a social licence
to operate
Business integrity
Preparing for our future
Business integrity
Environmental stewardship
Environmental stewardship
Organisational health and safety
Organisational health and safety
Advancing our people
Enhancing community benefits
Resource efficiency
Enhancing community benefits
Upholding
business
integrity
Prioritising
environmental
protection
Creating a safe
and healthy
working
environment
Prioritising the
development and
well-being of our
employees
Improving
resource use
efficiencies
Optimising
socio-economic
benefit
Sustainability
principles
underpin our
priorities
The SDGs
support,
contextualise
and inform
the principles
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SUSTAINABILITY CONTINUED
SUSTAINABILITY CONTINUED
ENVIRONMENTAL
Our commitment to responsible environmental stewardship and the UN SDGs compels us to better understand and manage our impact on
the natural environment, mitigating climate change and other environmental risks, so that we leave a positive legacy for future generations.
Related sustainability principles
Improving resource use efficiencies
Related UN SDGs
We launched the first rolling three-year cycle to embed the SDGs
into our systems, processes and decision-making during the year.
The following UN SDGs relate to our environmental pillar:
Prioritising environmental protection
Optimising socio-economic benefits
Refer to our Sustainability Report and Our Approach to Climate
Change Report for more information on our approach to
integrating these UN SDGs into our business operations.
Snapshot of our performance
In 2020, operations were suspended at Letšeng from 28 March to 26 April due to the Lesotho Government’s COVID-19-related lockdown.
Operational activities were ramped up during May and planned waste mining activities was successfully deferred to resume in July. The
suspension of operations explains the reduced resource consumption during 2020. For comparative purposes we have provided both 2019
and 2020 resource consumption data.
Zero major environmental incidents
for the 13th consecutive year
Zero significant environmental
incidents for the 8th consecutive year
US$0.9 million
invested in environmental
protection during 2021 (2020:
US$0.5 million)
US$14.9 million
environmental rehabilitation
provision (2020: US$16.1 million)
No fines for environmental
transgressions or non-compliance
with host country legislation for
the 12th consecutive year
ICMM Global Industry Standard
for Tailings Management adopted
and dam safety management
framework implemented
Annual social and environmental
management plan (SEMP) audit
programme implemented
ISO 14001 accreditation retained
8.9 million m3
of water
recycled. (2020: 8.8 million m3, 2019:
7.9 million m3)
Total carbon footprint of
153 864 tCo2e (2020:
135 694 tCo2e, 2019: 172 968
tCo2e)
Rehabilitation and closure
management strategy adopted
and updated
US$0.2 million
invested towards adopting the
recommendations of the TCFD
Our goals
• Understanding the long-term implications of climate change on our operations.
•
Identifying further opportunities to decarbonise our operational activities.
• Managing the effects of extreme weather on our operations.
•
•
•
Reducing consumption, particularly of fossil fuels, remains a focus as we identify and evaluate renewable energy solutions.
Implement innovative waste management strategies taking into consideration the remote location of our operations and limited
formal waste disposal facilities within our host countries.
Prioritising water conservation throughout the Group.
Our future
We remain committed to environmental responsibility, including
rigorous and ongoing monitoring of our water management,
reducing our environmental footprint, the recommendations of
the TCFD and upholding our commitment to the UN SDGs.
In 2022, we will advance our TCFD roadmap to appropriately respond
to relevant climate change-related risks and opportunities. We will
review our operation-specific SEMPs for improved impact mitigation,
implement our concurrent rehabilitation plan at Letšeng and aim
to develop and implement carbon, water and waste management
initiatives while maintaining and improving environmental standards.
Material matters
MANAGING OUR ENVIRONMENTAL FOOTPRINTS
Our context
We strive to responsibly manage our environmental impacts
by measuring, monitoring and minimising our consumption,
considering our water and carbon footprints and waste within our
value chain. We ensure responsible consumption with the utmost
respect for the natural resources we need.
We are working with operations to identify initiatives that reduce
our costs, resource consumption and our carbon, energy and water
footprints. These initiatives are predominantly focused on scope 1
and scope 2 carbon emissions, being (mobile and stationary fuel
combustion and grid electricity) as these represent approximately
84% of the Group’s total carbon footprint.
In addition, we understand that responsible waste management
plays a significant role in the sustainability of our business and long-
term protection of our environment. Our operation, which mainly
generates waste rock and residues from production processes,
ensures responsible management and disposal of all mineral and
non-mineral wastes.
Our approach
Carbon
We understand that it is a global imperative to reduce our carbon
footprint. Our goal is to reduce our carbon emissions to avoid any
dangerous anthropogenic interference in our climate system.
Our decarbonisation strategy considers all stakeholders and will
be implemented in a way that maintains our goal of mining in
a responsible manner. Letšeng operates in a country without
wide-scale access to renewables, as such a flexible and innovative
approach to decarbonisation is required. Refer to managing and
addressing climate change and extreme natural events in the
Sustainability report for more information.
Our carbon footprint is monitored and measured bi-annually
to develop and
initiatives that mitigate our
environmental impact.
implement
Water
Our operations are reliant on the continuous supply of water. We
collect rainwater in our freshwater and process water storage
facilities for operations and consumption on site. We are mindful
of our valuable relationship with our PACs, especially regarding
MANAGING OUR IMPACTS THROUGH BIOREMEDIATION
Water is one of the most valuable natural resources and is
expected to become increasingly constrained over time.
Safeguarding water sources through reduced consumption
and quality stewardship is a priority globally as well as within
the Mokhotlong region where our Letšeng operation is based.
Since Gem Diamonds started operating the Letšeng mine
in 2006, the operation has prioritised the stewardship of
water through a water management plan. The operational
approach to water management has matured over time to
align with appropriate best practice standards and operational
trends in water use and impact. A comprehensive water
monitoring protocol has been implemented at Letšeng, looking
at both water quality on-site and downstream, as well as
consumption volumes through mining and treatment activities.
In 2014, our Letšeng operation adopted a site-specific nitrate
management plan. As part of this plan, the operation researched
new water treatment technologies in collaboration with external
subject matter experts. Working with the University of the Free
State, bioremediation was identified as a priority technology
for further assessment. This led to the development of our
bioremediation nitrate treatment solution, which was subjected
to an intensive research and review process involving various
experts both regionally and internationally.
Bioremediation is a strategy that uses naturally occurring micro-
organisms to break down chemical compounds, such as nitrate,
into less toxic substances, such as nitrogen gas (N2). The passive
bioremediation method of remediation is especially appealing
as it does not produce any toxic or hazardous waste products.
Not only does bioremediation create significantly less waste than
alternative treatment methods, such as reverse osmosis, but it is
also more cost efficient and not as labour intensive.
At Letšeng, the bioremediation project is aimed at reducing
blasting-related nitrate levels from water emanating from the
mining operations’ facilities such as waste rock dumps and
tailings storage facilities. During 2021, our bioremediation
pilot plant was upgraded and re-commissioned to assess
the denitrification efficiency of the improved technology.
The pilot demonstrated the effectiveness of treating nitrates
using naturally occurring micro-organisms.
A full-scale bioremediation plant
is now designed with
construction to commence in 2022. This plant will treat water
seeping from the waste rock dumps, historically the water source
with the highest levels of nitrate. The treated water will then be
discharged from this plant, into a newly constructed wetland to
ensure sufficient water supply for downstream users.
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SUSTAINABILITY CONTINUED
SUSTAINABILITY CONTINUED
access to sufficient potable water, food security and stakeholder
engagement. We know that we cannot secure water resources for
our mine without ensuring that the water requirements of our PACs
are met. Our Group water management policy considers the water
needs of all stakeholders. Various operational departments have
implemented initiatives to reduce process water consumption,
secure adequate water reserves to operate during potential future
drought conditions and ensure stable access to water for PACs.
The water catchment facility below our Patiseng TSF captures
seepage and recycles water back into our processing plants.
This reduces the use of freshwater for processing and prevents
nitrates, related to the use of explosives, from entering the
natural environment. We have also created a wetland in our Qa
Qa catchment with endemic plants that absorb nitrates and
purify run-off during the summer months. The Group successfully
completed its bioremediation pilot plant study during 2021, with
plans to construct a full-scale bioremediation plant in our RTZ
catchment during 2022. Bioremediation uses naturally occurring
micro-organisms within the soil to absorb nitrates from water,
refer to our case study on page 71 for more information.
Waste
We continually seek ways to improve our waste reduction
efforts to minimise our impact on the natural environment and
surrounding communities. Our mining operations have waste
management plans for effective waste handling.
Non-mineral waste generated at our operations is managed
inline with the waste hierarchy; reduce, reuse, recycle and as last
option dispose. During 2021, we focused on reducing three main
sources of waste – food, plastic and polystyrene waste.
To minimise food waste as much as possible, the catering and
environmental teams identified and implemented initiatives to
reduce the volumes of food waste. In addition, to more effectively
manage food waste, Letšeng purchased a food shredder
that ensures improved composting and fermentation rates
of the waste. The compost and compost tea (a product of the
fermentation process) is used to bolster rehabilitation trials and
concurrent rehabilitation projects.
The Letšeng operation also ran campaigns focused on reducing
plastic waste, which included a total ban on bringing plastic to
site during November. It also aligned with a national initiative
‘Plastic Free Wednesdays’ during 2021. Staff were provided with
reusable lunchboxes to replace single use containers for food
storage. We continue to look at introducing sustainable initiatives
to reduce plastic use and waste in 2022.
The operations are compliant with the Basel Convention on the
Control of Transboundary Movement of Hazardous waste and
ensure that relevant permits are in place when hazardous waste
is moved from Lesotho to South Africa, as there are currently no
hazardous waste disposal sites in Lesotho. Hazardous waste is
then responsibly disposed of in South Africa at certified sites, that
issue safe disposal certificates.
Mineral waste at Letšeng is retained on site in structures
designed for this purpose. These structures comply with Lesotho’s
requirements and international best practice standards. Our
non-mining operations generate small quantities of domestic
waste. During 2021 we advanced our adoption of the ICMM
Global Industry Standard on Tailings Management. Appropriate
governance committees were established to oversee the
adoption and alignment of operational practice with the
standard, including the constitution of an internal tailings review
board consisting of two world renowned tailings facility and risk
management experts.
Operationally we continue to look at ways to minimise the mining
and movement of mineral waste. Our steeper slope project has
significantly reduced the mining and movement of mineral
waste, and further opportunities in this regard are being explored.
Our performance
Carbon
At Letšeng, we have implemented numerous initiatives reducing
our carbon emissions, such as steepening the slopes of the pit
walls to reduce waste movement and shortening our waste
hauling distances by optimising our routes. These initiatives
reduce our carbon emissions through reduced fuel consumption.
Refer to page 65 for the case study on our optimised waste
dumping strategy and to Our Approach to Climate Change
Report for our carbon emissions performance metrics.
Water
We actively minimise freshwater use by recycling and reusing
water on site, recovering run-off water, managing the impact and
flow of stormwater, and economising our water consumption.
Our stormwater management system is designed to catch
and redirect stormwater drainage into our freshwater dam and
we continually explore additional catchment and freshwater
supply opportunities for the operation and its PACs. Refer to
our Sustainability Report and Our Approach to Climate Change
Report for our water consumption performance metrics.
Waste
Effective waste management and awareness campaigns
continued, and a food waste shredder and an incinerator were
installed and commissioned during the year at Letšeng to
improve waste management.
MANAGING AND ADDRESSING CLIMATE CHANGE
AND EXTREME NATURAL EVENTS
Our context
It is widely accepted that human influence has warmed the
atmosphere, ocean and land, causing widespread rapid changes
to the planet and the climate system as a whole. Human-induced
climate change has already affected weather patterns across
the globe. The International Panel on Climate Change (IPCC)
Working Group 1 predicts that the world will exceed 1.5°C global
temperature increase within the next two decades.
Our operations are located in remote areas, making them susceptible
to more frequent extreme weather events due to climate change.
These weather events include snowstorms, extreme temperatures,
flash floods and drought. Understanding climate related risks and
potential impacts is key to assess our organisational exposure and
resilience to climate change. It also provides guidance to update
business continuity plans and operational strategies to mitigate the
impact of climate change related risks.
Historical natural events in Lesotho include hailstorms, snowstorms,
droughts and frost days. The longest drought in over 200 years was
recorded between 1991 and 1995, which negatively impacted
communities and the economy within Lesotho.
Lesotho frequently experiences localised floods, damaging basic
service infrastructure in already impoverished communities, with
75% of the Lesotho population residing in rural areas, and are
exposed to the effects of extreme weather including extreme cold,
snow and other precipitation events.
Our approach
We are cognisant of the risks presented by climate change and
its potential impact on our operations and stakeholders. This
year, we adopted the TCFD framework and implemented its
recommendations throughout the Group.
We view climate change through two lenses in line with the
framework’s recommendations. Firstly, we ensure operational
resilience and continuity in terms of the physical risks, including
extreme weather events. Secondly, we are preparing for the
transition to a low-carbon economy.
Refer to Our Approach to Climate Change on page 26 for more
information on our TCFD adoption roadmap and climate change-
related work.
During 2021 the Group undertook a CCSA to assess which
physical climate change-related risks will emerge at our
locations over the short-, medium- and long-term. The CCSA
was based on a mix of quantitative and qualitative data and
information sourced from the Carbon Brief and World Bank
climate change knowledge portal. This data and information
informed the short-, medium- and long-term models developed
for all locations that the Group operates in.
The CCSA especially focused on Letšeng, currently our only
operating mine. It also took into consideration the life of mine
of the operation.
Four temperature increase scenarios were included in the CCSA,
namely 1.4°C, 1.9°C, 3.3°C, and 6.0°C. These scenarios were
informed by shared socio-economic pathways (SSPs). The SSPs
were developed by climate scientists to model the greenhouse
gas concentration trajectory, and was subsequently adopted
by the IPCC. The 6.0°C scenario represents the current world
economy continuing to function under the current conditions
of little to no climate adaption or global GHG emissions
reduction initiatives.
The physical weather parameters considered in the modelling
included:
Temperature
•
• Wind
•
Frost days
• Heat days
• Cold waves
• Heat waves
•
Precipitation events
• Drought likelihood
The risk to the Group, in terms of potential physical climate
impact, was assessed considering the following aspects:
• Human health
• Water resource availability
Energy and electricity
•
Vegetation
•
The CCSA identified the following physical climate change-
related risks that could impact on the Letšeng operation:
•
•
•
•
Temperatures will increase over the next two decades.
The number of frost days at the operation will increase.
The operation will, on average, experience reduced
precipitation and more frequent severe drought periods.
Sporadic occurrences of thunderstorms and hailstorms will
be more extreme.
The above physical climate change-related risks will inform an
operational exposure assessment to drive the Group adaptation
and mitigation strategy.
The last three years have seen an acceleration of climate change
related information and regulations. The Group has embraced
this and is actively incorporating these into relevant climate
change strategies and plans, such as the Letšeng climate change
adaptation and water management plans. These updates will
also include the specific physical climate-change related risks
identified through the CCSA.
The Group has its two assets located in extreme natural
environments, and it has been managing and responding to
extreme natural events since 2006. The operational business
continuity plans, disaster management plans, and all other
operational procedures and systems are informed by the extreme
weather already experienced at these locations. The Letšeng
operation maintains a two-week supply of food and diesel, should
extreme weather disrupt access and energy supply. In addition,
our medical teams are suitably equipped with extensive training
in high-altitude rescues and treatment under extreme conditions.
Our water management systems also consider potential natural
events. Dams and storage facilities are managed so that there
is excess capacity to handle a sudden influx of water without
compromising safety.
During 2021, the prolonged drought in Lesotho ended with
localised flooding. Our water management strategy prioritises
water saving, recycling and catchment efficiency initiatives
to preserve water and ensure it is always treated as a precious
resource. At the same time, our teams respond swiftly to assist
communities during periods of flood and drought. The increased
frequency of extreme flooding and prolonged drought periods
illustrate the potential impacts of climate change at our Letšeng
operation.
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SUSTAINABILITY CONTINUED
SUSTAINABILITY CONTINUED
Our performance
We adopted the TCFD recommendations and implemented
phase one of our three phase TCFD roadmap. The implementation
of phase one included:
•
•
Improved climate change governance structures.
Enhanced organisational risk processes to integrate
climate change.
• Completion of a detailed climate scenario analysis to ensure
science-based data inform decisions.
• Appropriate training to ensure understanding of climate
change across the business.
• A strategy process which integrates climate change
Lesotho national grid, which is fed through the South African
national electricity supplier Eskom. Grid instability and rotational
load shedding by Eskom affects the Letšeng operation as the
electricity supply to Lesotho is cut periodically to protect the
South African national grid.
To ensure a consistent supply of energy to the mining operations
and associated infrastructure, a generator-based power supply
system is in place. The generators are operated when extreme
weather or Eskom-related electricity cuts impact production.
The Ghaghoo mine, which is currently on care and maintenance,
is powered by an on-site generator as no access to grid-based
electricity exists at that
location. The Groups’ office-based
locations are all fed through grid electricity.
considerations.
Our approach
• Updating the climate change adaptation plan.
• Updating the stormwater management and catchment plan.
ENSURING CONSISTENT ELECTRICITY SUPPLY AND
MINIMISING ENERGY CONSUMPTION
Our context
The consistent and stable supply of power is critical for mining
operations. The Letšeng mining operation accounts for the vast
majority of the Groups energy consumption, both in terms of
fossil fuel-based energy and grid-based electricity. Therefore,
our energy efficiency initiatives are focused on reducing the
energy consumption profile at Letšeng. Our one direct source of
grid electricity at the mine is grid-based electricity through the
As part of the work that the Group is doing to reduce its carbon
emissions, we have identified several opportunities relating to
energy and electricity that will assist us as we strive to decarbonise
the business and evaluate which opportunities are feasible for the
Group to implement. The Group recognises the need to transition
appropriately to energy sources that are less carbon intensive
than the traditional fossil fuel-based energy sources that currently
power our operations.
During 2021, the Group assessed several energy-saving initiatives,
specifically at Letšeng as the primary energy consumer. Our
approach to energy saving initiatives considers both short- and
long-term initiatives. The following initiatives were implemented
in 2021.
By optimising heating systems, we were
able to reduce the energy requirements for
accommodation heating by 19%
Through the implementation of technology that
staggers energy demand related to lighting and water
heating, we reduced the peak power demand in the
accommodation facilities by 28%
The Letšeng operation implemented a ISO 50001
aligned energy management system that further
informs the operational approach to manage, track
and protect energy supply as well as track and
minimise energy consumption.
We reduced our waste rock hauling distances,
resulting in a reduction of our carbon emissions
and diesel consumption.
The Group commissioned independent energy advisors to
identify opportunities to improve energy efficiency and reduce
energy related emissions as a result of reduced consumption or
cleaner energy sources. The assessment included mobile and
stationary combustion related fossil fuel consumption and grid
supplied electricity.
The various studies undertaken during 2021 also identified
a number of challenges that the Group need to consider in its
decarbonisation assessments:
•
•
•
•
The remaining life of open pit mine at Letšeng impacts on
the feasibility of any capital-intensive projects.
The mine operates in a region that is protected as a nesting zone
for endangered vultures, as a result, wind power development is
not possible within a 40km radius of the operation.
The location specific irradiance of the Letšeng mine indicates
that a maximum of 5.5 hours a day is available for energy
yield through solar PV.
The extreme low temperatures at Letšeng eliminates the
possibility of Biodiesel replacing or substituting traditional
mineral diesel due to the biodiesel thickening within the fuel
system at low temperatures.
• As of 2021, no renewable or alternative electricity sources
are available to Letšeng to replace the existing grid supplied
electricity supply.
At Ghaghoo, energy consumption has reduced since the
operation was placed under care and maintenance in 2017 with
further reductions in 2020 and 2021 following the reduction of
our underground dewatering activities. One generator remains
in use for essential services and there is a back-up generator
when needed.
Our performance
Frequent load shedding and extreme storm events have increased
the use of generators at Letšeng. These energy interruptions are
potentially damaging and costly as machinery must shutdown
safely and not mid-use. Restarting machinery also consumes
more power and could damage equipment. Power interruptions
therefore pose a risk to our operations. To mitigate this risk, we
ensure that load shedding schedules and regional weather
predictions reports are integrated into our production planning
to facilitate an effective change-over to generator power.
We have disclosed our carbon, energy and water footprint
performance metrics in our Sustainability Report and Our
Approach to Climate Change Report.
PLANNING FOR MINE CLOSURE
Our context
Mining is one of the main contributors to the gross domestic product
(GDP) of the countries in which we operate. It offers considerable
direct and indirect employment opportunities during a mine’s
lifespan. However, there is potential for adverse environmental and
socio-economic impacts if mines are not managed responsibly
during and post its lifespan. Rehabilitating environmental impact
only is not sufficient to responsibly close a mine, and our mine
closure plans therefore also consider the socio-economic status and
impacts of potential mine closure on our PACs.
Our approach
We take a long-term view of the land under our management,
recognising that adverse
impacts must be remediated to
demonstrate responsible stewardship of natural resources. All our
project life cycles focus on the rehabilitation of our mine lease
areas, during and post life of mine.
We follow best practice when planning mine-closure programmes.
This is part of our responsibility to our host countries and the
communities close to our mines. Our operations have integrated
rehabilitation plans that are supported through concurrent
rehabilitation and annual reassessment of rehabilitation strategies.
This approach ensures that we meet our closure objectives
as responsibly and efficiently as possible. We also quantify
unforeseen mine rehabilitation and restoration costs, and make
adequate financial provision in the Group’s financial statements.
As Letšeng is located in the extreme highlands of Lesotho,
guidance on successful rehabilitation is scarce. Since 2012, a
series of trials have examined different rehabilitation applications
to test closure criteria and estimate the mine’s rehabilitation
and closure costs. These trials replicate the rehabilitation of the
mine’s main waste residue disposal facilities: fine tailings (slimes),
coarse tailings and waste rock. The trials use waste rock and
tailings reserves with minimal topsoil requirements, and examine
vegetation rehabilitation and restoration of natural ecosystems.
Topsoil is essential for successful vegetation and it is considered
a critical component to the successful post-mining rehabilitation
of the mine.
In addition to these initiatives, several academic studies are
underway, in collaboration with the National University of Lesotho
and North-West University in South Africa, at Letšeng to inform
rehabilitation and support mining strategies and techniques that
enables concurrent rehabilitation.
Our Ghaghoo mine remains under care and maintenance. We
continue to review its rehabilitation plans as we investigate
restorative initiatives to reduce the end of mine life liability.
We engage with independent experts at Letšeng and Ghaghoo
to understand the work needed to ensure safe and responsible
end of life mine closure. Letšeng’s rehabilitation plans and
resultant liability are reviewed externally every year. In 2021,
the end of mine life rehabilitation provision reduced to US$14.9
million (2020: US$16.1 million) following improved concurrent
rehabilitation planning.
Our performance
• US$14.9 million environmental rehabilitation provision (2020:
US$16.1 million).
•
•
•
•
•
6 174h a of land under our management (2020: 6 174ha).
1.95ha newly disturbed by mining operations (2020: 10.2ha).
Total disturbed land to 776.15ha (2020: 774.2ha).
Rehabilitation and closure plans were updated.
Rehabilitation and revegetation trials at Letšeng are proving
successful.
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SUSTAINABILITY CONTINUED
SUSTAINABILITY CONTINUED
PROTECTING BIODIVERSITY AND ENHANCING
CONSERVATION
Our context
While mining is a significant contributor to host nations’ socio-
economic prosperity, it can also have a significant environmental
impact. Gem Diamonds is committed to mitigating environmental
damage, protecting biodiversity and enhancing conservation
efforts.
Letšeng is located in the Maluti Drakensberg Transboundary
Park, a legally protected key biodiversity area. All potential
biodiversity impacts of the mining activities were assessed as part
of the SEIA process and the SEMPs include consideration for the
management and mitigation of direct, indirect and cumulative
impacts. Operational Biodiversity Management Plans have been
developed for Letšeng and are reviewed annually, biodiversity
monitoring is conducted every two years to inform further
possible updates to our management plans.
Our approach
We are responsible for protecting the biodiversity of indigenous
flora and fauna surrounding our mine. Through our closure
planning, rehabilitation strategy and biodiversity management
plans, we ensure biodiversity is included in our financial planning
and long-term strategy objectives.
We collaborate extensively with our host countries, PACs,
industry stakeholders to
regulators, scientists and other
implement practical environmental protection strategies.
Ultimately, we aim to ensure environmental and socio-
economic sustainability and prosperity for our host countries,
PACs and business. Bioremediation is the cornerstone of our
water quality conservation efforts and a critical part of our
stakeholder relationships.
Our biodiversity risk assessments take into consideration all
threatened, migratory and endemic species as well as regionally
relevant ecosystem services such as rangeland, wetlands,
grassland and water. At Letšeng, the biodiversity offset strategy
has been implemented to mitigate mining related impacts on
biodiversity. The offset strategy includes:
• No-go areas, protected from any development.
• An indigenous plant garden.
• An artificial wetland construction programme.
• Native seed propagation and rehabilitation trial programme.
• Concurrent rehabilitation plan.
• Grazing management plan in collaboration with subsistence
farmers in the region.
Our annual biodiversity monitoring found positive rangeland
performance over the 2020-2021 period and increased biomass
production in the mine lease area as a result of biodiversity
initiatives. The Spiral Aloe (Aloe polyphylla) is a protected plant
that is endemic to Lesotho and threatened to near extinction.
Despite being declared a protected plant in Lesotho since 1938,
their in-country numbers have been declining.
During 2021, the Letšeng biodiversity monitoring noted a
high density of both adult (894) and seedling (70) Spiral Aloes,
and no indication of illegal harvesting on site. The successful
establishment of the Spiral Aloe is indicative of the successful
biodiversity management strategy implemented at the operation.
In addition, the monitoring also confirmed that the mammalian
diversity on site has remained stable for the 2015-2021 period.
Letšeng hosts 39.5% of all mammalian species found in Lesotho.
Our performance
• Conservation plans updated annually.
•
Biannual mammal-monitoring protocol rolled out.
• Completed a wetland rehabilitation and biodiversity offset
project.
SOCIAL
The Group’s purpose ‘Unearthing unique possibilities’, is directly underpinned by three strategic priorities: extracting maximum value from
operations, preparing for our future, and working responsibly and maintaining our social licence to operate.
Our social licence to operate depends on regular engagement with government and local communities, as well as financial and practical
support, to address challenges with mutually beneficial and sustainable solutions. As responsible operators and social partners in our host
countries, we endeavour to maintain healthy and constructive relationships with governments and our PACs.
As mining life is finite, we need to establish CSI projects that continue to create value in our absence.
Related sustainability principles
Prioritising environmental protection
Related UN SDGs
We launched the first rolling three-year cycle to embed the UN
SDGs into our systems, processes and decision-making during
the year. The following UN SDGs relate to our social pillar:
Optimising socio-economic benefit
Prioritising the development and wellbeing of our
employees
Refer to our Sustainability Report and Our Approach to Climate
Change Report for more information on our approach to
integrating these UN SDGs into our business operations.
Snapshot of our performance
US$0.2 million invested in COVID-19
community relief (2020: US$0.1 million)
US$0.8 million invested in social
projects (2020: US$0.3 million)
US$164.9 million
spent on local procurement (2020: US$126.9 million)
Zero major or significant community
incidents (2020: zero)
Our goals
•
Supporting our PACs following localised flooding in 2021
that damaged infrastructure and washed away access roads.
Extending our support of existing CSI projects to ensure
their independence and sustainability following the impact
of COVID-19.
Reducing costs and enhancing operational efficiencies while
balancing the needs of our stakeholders.
•
•
• Working to implement both the 2021 CSI strategy and
projects postponed from 2020 resulting from the COVID-19
related lockdowns and restrictions.
Our future
•
Strengthen our partnership with our PACs through CSI
initiatives that support the creation of lasting mutually
beneficial industries, through extended support.
•
Enhance communication and stakeholder engagement.
• Mature our integration of UN SDGs into our corporate social
responsibility strategy.
Material matters
SAFEGUARDING OUR COMMUNITIES
Our context
Since the start of the COVID-19 pandemic, our primary objective
has at all times been to operate safely and responsibly, ensuring
the safety and health of our workforce, their families and the
communities surrounding our operations while also supporting
Lesotho’s national effort to curb the spread of the virus.
At Letšeng, 98% of our workforce resides in Lesotho, and therefore
we recognise that embedding a safe and responsible workplace
practice at Letšeng directly and indirectly benefits and protects
vulnerable PACs. Our mining operations face daily challenges
due to their remote locations, including extreme weather, difficult
transport routes and limited public infrastructure. While these
circumstances pose significant operational challenges, they can also
impact the health and well-being of the communities surrounding
our operations. In addition to the challenges community members
face due to their natural and built environment, our responsibility
as a good corporate citizen is to protect our communities against
any potential risks posed by our mining operations and support
our communities during times of crisis.
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SUSTAINABILITY CONTINUED
SUSTAINABILITY CONTINUED
Our TSFs are integral in to mining operations, yet they present
a substantial risk if not responsibly managed. In response to
global TSF failure-events, the ICMM developed and finalised the
GISTM for its member companies. Gem Diamonds has adopted
the GISTM and aligned its existing TSF Code of Practice with the
recommendations of the Standard.
Our approach
We follow a comprehensive social and environmental engagement
programme to help us identify the need of PACs. The Letšeng
operation has committed to investing 1% of annual turnover or a
minimum of LSL5 million towards community initiatives every year.
In addition, following the recovery and sale of special diamonds,
those greater than 300 carats, 1% of the diamond’s sale value is
directed to social projects. These obligations are included in our
Mining Lease agreement with the Government of Lesotho.
During 2021, Letšeng engaged an external independent party to
conduct a needs analysis within the Mokhotlong and Thaba-Tseka
districts. The findings of the needs analysis informed the five-
year community investment strategy, ensuring that the identified
community needs directly inform the CSI strategy.
COVID-19
We leverage our infectious disease management platform to help
raise awareness about COVID-19 by engaging extensively with
government, medical experts and communities. The goal is to
protect our workforce and support Lesotho locally and nationally
in minimising the impact of the pandemic.
We continue to support the Lesotho government in its fight
against COVID-19, and in 2021 Letšeng donated 20 000 vaccines,
oxygen concentrators, personal protective equipment and an
ambulance. Approximately 99% of our Letšeng workforce have
been vaccinated.
Dam safety and integrity
Globally, the most recent dam failures are attributed to ‘upstream’
construction methods. Letšeng has three dams on site: the
Patiseng TSF, the Old TSF and the freshwater Mothusi Dam – all
constructed using ‘centre line and downstream construction
methods, which is recognised as a safe and stable construction
method’. Gem Diamonds prioritises the safe and responsible
management of its tailings and freshwater storage facilities to
mitigate any potentially significant risk posed by these facilities.
The Letšeng facilities undergo stringent daily, weekly and monthly
inspections during which various factors are surveyed, including
water level, beach length, freeboard and overall structural stability.
Furthermore, we have implemented an early-warning system
with continuous community training and awareness programmes
to ensure communities’ emergency readiness in the unlikely
event of a failure. Ensuring the integrity of our mining waste and
freshwater storage facilities also safeguards our communities.
We are proactive in monitoring dam safety in terms of our
GISTM aligned Dam Safety Protocol. Stringent dam wall safety
monitoring involves regular internal and external inspections and
audits throughout the year. The findings and recommendations
are reported to the sustainability subcommittees and the Board.
For more information about our TSFs, read the Gem Diamonds
voluntary disclosure as part of the Investor Mining and Tailings
Safety Initiative of the Church of England.
We also regularly monitor natural springs and local boreholes in
and around our PACs. Over the years, we have seen an increase
of E. coli bacteria from livestock fouling the community water
sources while grazing or drinking. To assist the communities and
mitigate the risk of bacterial infection from the E.coli, we provide
clean potable water to local communities.
Road safety
is
As basic transport infrastructure and road services in the region
inadequate, we
and communities surrounding Letšeng
regularly upgrade roads, clear snow, scatter salt on iced access
roads and remove vehicles obstructing access to communities
and the mine. In the event of vehicle accidents and other road
emergencies, the Letšeng clinic and healthcare workers, which
include advanced life support paramedics, are often the closest
and best equipped to assist. In 2021, the clinic responded to
13 accidents on national roads and 60 injured people from the
public were treated in our clinic.
Our performance
•
•
Zero incidents of compromised dam integrity were recorded
in 2021 (2020: zero).
In 2021, the Letšeng emergency team responded to 22
emergency calls (2020: 12) from PACs of which 13 were
motor vehicle-related (2020: 9).
ENSURING POSITIVE ENGAGEMENT WITH OUR
STAKEHOLDERS
Our context
The strength of our relationships with our stakeholders, particularly
employees, regulators, PACs and host governments ensures our
social licence to operate. These relationships depend on our effective
management of ethics, labour practices, environmental and social
responsibility, and our risk management and engagement activities
with stakeholders. Our culture of care encourages us to engage,
listen and respond responsibly to our stakeholders’ needs. Our
decision-making is helped by regular stakeholder engagements,
enabling us to create value for society at large and promote our
long-term sustainability. Refer to page 17 for more information
about stakeholder engagement and management.
As Lesotho has high levels of unemployment, inequality and
poverty, we have a responsibility to contribute positively and
sustainably to the economy and to our PACs during and beyond
life of mine. Letšeng is guided by our stakeholder engagement
and corporate social investment strategy in this regard. For more
information, read our Optimising positive social outcomes case
study in the Sustainability Report.
Our approach
Our community engagement approach is informed by operation-
specific social and environmental impact assessments (SEIAs) and
community needs analyses following extensive public participation.
It is also aligned with host country legislation and international
best practice guidelines such as the Equator Principles and the
International Finance Corporation (IFC) Performance Standards on
Environmental and Social Sustainability.
Acknowledging our communities’ unique cultural and traditional
context is essential, and we aim to engage transparently and
respectfully. We achieve this by employing suitably qualified and trained
people. Furthermore, our operations have a stakeholder consultation
framework to ensure regular, meaningful engagement. We integrate
feedback from these engagements in our decision-making. At Letšeng,
community representatives communicate with the CSI department
as a sustainable and culturally effective link between PACs and the
mine. Community representatives sit on the CSI subcommittee of the
Letšeng Board, which meets quarterly to discuss the implementation
and sustainability of current and planned projects.
Community engagement at Ghaghoo was downscaled when the
mine was placed on care and maintenance in 2017. Although this
reduced CSI project-related investment at Ghaghoo, we continue to
support the Gope community close to the mine with potable water,
medical care, and inclusion in regular health and safety campaigns.
Our performance
• No major or significant stakeholder incidents occurred at any
of our operations (2020: none).
• No incidents involving any violation of the rights of the
indigenous people on whose land the Group operates
(2020: none).
• COVID-19-related aid and assistance provided to PACs.
•
20 000 vaccines donated to the Government of Lesotho.
• US$0.9 invested to minimise the impact of the COVID-19
pandemic in Lesotho.
MINIMISING OUR POTENTIALLY NEGATIVE SOCIAL
IMPACT
Our context
As our mines are in remote rural locations, we recognise and respect
the importance of protecting the surrounding communities’ well-
established cultures and social structures. We believe it is our
duty to support the upliftment of these communities’ economic,
environmental and social sustainability potential, promoting
practices that protect human rights in every aspect of our operations.
Our approach
Our six priority UN SDGs are integrated into our community
investment strategy to ensure that projects contribute to both
local needs and global goals.
Our overarching impact assessments are guided by Free, Prior
and Informed Consent (FPIC) guidelines. FPIC is a specific right
that pertains to indigenous peoples and is recognised in the
United Nations Declaration on the Rights of Indigenous Peoples
(UNDRIP). It allows them to give or withhold consent to a project
that may affect them or their territories.
We align our community engagements and CSI projects with
international best practices and sustainability principles. Our
informed approach uses information gathered in community
needs analyses and SEIAs. These assessments include extensive
public participation to understand our PACs’ needs and
concerns. The goal is to minimise adverse mining impacts while
identifying opportunities for positive outcomes. Our SEIAs involve
biodiversity surveys as well as studies of soil, water and air quality,
archaeological surveys, visual and socio-economic
impact
assessments, and an extensive public participation process.
Our performance
•
Zero incidents involving the violation of the rights of
indigenous communities (2020: zero).
• We continued to engage with PACs through established and
enhanced forums in a safe and responsible manner.
•
Zero major or significant community grievances were
lodged (2020: zero).
WORKING WITH COMMUNITIES TO UNDERSTAND
AND MEET THEIR NEEDS
Our context
Lesotho is a developing country with high poverty rates. The
three districts bordering our Letšeng mine are home to some of
the most impoverished communities in Lesotho. The diamond
and textile industries are the primary contributors to the country’s
export economy. We contribute towards our host communities
through the payment of taxes and royalties as well as our
sustainable development investments, local employment and
procurement practices. To ensure that our investments create
meaningful change, we focus on authentic engagement with
our communities to understand their needs and implement
sustainable projects.
Our approach
We value our mutually beneficial relationships with our PACs
as this ensures our long-term sustainability. We comply with
regulations and legal requirements and go beyond legislation
to make a meaningful impact and meet our host communities’
needs.
Each project in our CSI programme follows a five-year plan to
ensure sustainability. Our CSI projects focus on education, health,
infrastructure, the environment and enterprise development.
We include the SDGs in conceptualising new CSI initiatives to
contribute to achieving these goals. Refer to our Sustainability
Report and Our Approach to Climate Change Report for
more information.
We also value education, mentorship and skills transfer. Our
scholarship programme works with the government to identify
scarce skills, particularly in mining, engineering, emergency
medical care, geology and finance. Since the scholarship
programme was launched in 2006, 48 scholarships have been
awarded to deserving young Basotho. 47 of whom have
graduated successfully and 25 of whom are employed full-time
at the mine.
Our performance
• CSI investment of US$0.8million (2020: US$0.3 million).
•
•
Externally led community Needs Analysis.
The Tlokoeng and Mokhotlong egg circles were completed
at the end of October, farmers subsequently began
supplying eggs to the Letšeng mine.
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SUSTAINABILITY CONTINUED
SUSTAINABILITY CONTINUED
• We provided ongoing support to our flagship dairy and
vegetable projects when handover was delayed due to the
COVID-19 pandemic.
We recruit locally and match available local skills with our operational
requirements wherever possible. In total, 98% of our Group’s workforce
are citizens of our host countries.
•
Since its inception, we have issued 48 scholarships and over
100 interns have received valuable experience at Letšeng
mine.
We also ensure that our goods and services are purchased from local
suppliers who comply with necessary standards, and we help these
entrepreneurs develop their businesses.
EMPLOYEES
Our primary objective is safeguarding the health and safety of our employees, their families and surrounding communities – everyone
should work and live in a safe environment every day.
We promote equality, diversity and professional development for employees at every business level with attention to their physical and
psychological wellbeing.
SUPPORTING OUR COMMUNITIES THROUGH
LOCALISATION TO CREATE SHARED VALUE
Our context
Localisation is crucial in creating shared value for our host
countries and communities. We therefore employ people from
our PACs and engage with local businesses in our supply chain
to contribute meaningfully to the well-being of our communities
while meeting our business needs.
Our approach
The Letšeng mine is a major contributor to Lesotho’s economy,
providing jobs for more than 1 600 people and supporting socio-
economic development through focused local procurement initiatives.
Our performance
•
98% of Letšeng’s workforce comprises Lesotho nationals
(2020: 98%).
• Group in-country procurement was US$164.9 million (2020:
US$126.9 million) of which US$3.4 million was procured
directly from PACs (2020: US$2.2 million) and US$31.4 million
(2020: US$27.4 million) from communities around Letšeng.
Related sustainability principles
Creating a safe and healthy working environment
Prioritising the development and wellbeing of our
employees
Optimising socio-economic benefit
Related UN SDGs
We launched the first rolling three-year cycle to embed the UN
SDGs into our systems, processes and decision-making during
the year. The following UN SDGs relate to our employees pillar:
Refer to our Sustainability Report and Our Approach to Climate
Change Report for more information on our approach to
integrating these UN SDGs into our business operations.
TAKING A HOLISTIC APPROACH TO COMMUNITY ENGAGEMENT AND IMPACT
Snapshot of our performance
At Gem Diamonds, we are committed to creating meaningful
and lasting change. We want to leave a positive legacy in the
countries in which we operate through contributions to local
economies, maximising local employment and procurement,
as well as developing sustainable CSI projects. We take an
integrated approach on how we achieve this, understanding
how inextricably linked the issues of sustainability, society and
the environment are.
While our CSI activities have focused on PACs at our operating
mine in Lesotho, where the need is the greatest, we also
acknowledge that we are a part of a global community striving
to address larger issues. To this point, we have integrated
the UN SDGs into our decision-making process, with six of
the 17 UN SDGs identified as key to our communities and
organisational objectives.
COVID-19 has caused severe health and economic devastation
for communities across the globe and Lesotho was no
different. In 2020, as the crisis first unfolded and numerous
travel and other restrictions were imposed, we shifted our
focus to supporting our PACs and the Lesotho nation at large.
CSI funds were allocated towards the most urgent of needs,
including food aid and PPE provision, as well as training health
care workers and the donation of a mobile testing lab.
In 2021, we refocused on our longer-term CSI goals as the impact
of COVID-19 on our operations stabilised. However, before we
could fully return to our CSI agenda, localised flooding in the
Mokhotlong district impacted the accessibility of seven of the
nine villages located downstream from the mine. Roads were
washed away and villages became inaccessible. We responded
swiftly to support and assist our communities affected by the
floods, and immediately started work to rebuild damaged
infrastructure (including footbridges, access roads, water
provision infrastructure and schools). We are is well versed in
assisting our PACs during extreme weather events, and pride
ourselves on our resilience to these events both operationally
and in assisting our communities. Our climate change-related
studies which confirm the probability of the
increasing
occurrence of extreme weather events that are likely to affect
local communities, are used to inform appropriate community
response plans and disaster management procedures.
We recognise the importance of the well-established cultures
and social structures in the local communities surrounding
our operations. We therefore take a holistic approach to
community engagement, informed by specific social and SEIAs
and community need analyses. The SEIAs and community
needs analysis are informed by extensive public participation,
host country
international best practice
guidelines such as the World Bank Equator Principles and the
International Finance Corporation’s Performance Standards on
Environmental and Social Performance.
legislation and
Our community needs analysis, delayed in 2020 due to COVID-
lockdowns, was recommissioned during 2021.
19-related
The externally facilitated needs analysis not only reviewed
the existing CSI projects, but also engaged directly with
PACs to understand their immediate needs. This approach to
understanding and prioritising the needs of our PACs directly
informs our five-year CSI strategy, which incorporates our UN
SDG priorities to maximise impact.
The bisecting crisis of climate change and COVID-19, with
numerous knock-on effects on economic growth and social
cohesion, are expected to adversely impact our communities.
We are committed to developing sustainable,
informed
interventions that empower our host communities and create
a real impact in their lives, long after our mine is closed.
Zero fatalities (2020: zero)
Six lost time injuries (LTIs)
(2020: one)
US$0.7 million
invested in COVID-19
mitigation measures at Letšeng
(2020: US$1.1 million)
All injury frequency rate (AIFR):
0.93 (2020: 0.76)
Letšeng retained ISO 45001
certification
More than 17 800 COVID-19
tests at Letšeng (2020: 13 000)
Lost time injury frequency rate
(LTIFR) of 0.24
(2020: 0.04)
US$37.4 million
spent on employee
remuneration and benefits
(2020: US$31.8 million)
67 599 proactive safety
management actions
(2020: 55 547)
Our goals
• Continuously mitigating the impact of COVID-19 on our workforce and PACs.
• Addressing our operational safety culture through a comprehensive leadership and safety campaign.
• Attracting and retaining talent with the required skills and relevant experience.
Our future
We will continue ensuring our employees’ safety and health as the pandemic continues, leveraging our existing COVID-19 management
protocols and vaccination programme to keep our workforce safe.
We will continue to deepen our understanding of the safety culture maturity of our workforce at our mining operations and strengthen our
leadership teams to support our zero harm goal. Refer to our organisational safety culture case study for more information.
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SUSTAINABILITY CONTINUED
SUSTAINABILITY CONTINUED
COMBATTING COVID-19 – AN INTEGRATED APPROACH
In line with our commitment to zero harm, we strive to ensure a
safe and healthy working environment throughout the Group’s
operations. Following the onset of the COVID-19 pandemic, we
responded by proactively managing the emerging challenges,
enabling us to protect our workforce and allowing operations
to continue in a safe manner.
Our Letšeng operation worked with all key stakeholders,
including our workforce, PACs and the Government of Lesotho,
to identify how to:
• Collaboratively mitigate the impact of the pandemic.
• Curb the spread of the virus, both at our operations and
in our PACs.
•
Practically support the Government and our
communities.
For more information on the support given to our PACs and
Government partners, which includes the donation of 20 000
vaccines, oxygen concentrators, personal protective equipment
and an ambulance, refer to the social section on page 77.
To ensure we could continue operations safely, a COVID-19
response plan was implemented. The response plan focused on:
• Adhering to COVID-19 protocols and procedures such
as appropriate PPE, social distancing, sanitising and
quarantining.
• Wide-scale screening and testing.
• An on-site vaccination programme.
We also took the host country regulations and associated
alert levels into account, adjusting the on-site protocols and
procedures as needed.
Throughout the year, we continued with COVID-19 screening
and testing at staff transportation points, before travelling to
site, and on site. A quarantine and contact tracing procedure
was implemented to limit transmission of the virus. Team
members who tested positive or showed symptoms were
immediately isolated, assessed and safely transported to their
homes or a regulated medical quarantine facility.
A key highlight of 2021 was the successful roll-out of our
vaccination drive. While 52% of the world population was fully
vaccinated against COVID-19 as at 31 December 2021, only
US$ 1.8 million
invested at
Letšeng
30 820
Covid-19 tests
conducted
OUR
COVID-19
RESPONSE
2 371 rapid
antigen tests
conducted
99%
vaccination
rate
US$ 1 150
invested per
Letšeng
employee
3 677 PCR tests
conducted
24 926 rapid
antibody tests
conducted
34% of the eligible population in Lesotho was fully vaccinated.
In this context, it is pleasing to report that the focus and effort to
raise awareness and drive a vaccination campaign throughout
our operations achieved a 99% vaccination rate to date. The
success of this programme is due to an extensive on-site
information campaign and our collaboration with the Lesotho
Ministry of Health to have the workforce vaccinated on site.
We are conscious of the impact COVID-19 has had on our entire
workforce both in the workplace and at home. These impacts
have manifested themselves in mental health, fatigue and
operational performance issues. To address these, we focused on
regular employee engagement and a full-time psychologist was
appointed to provide mental health support to our workforce.
Our COVID-19 strategy has enabled us to continue operating
safely and responsibly and is reflective of our commitment
to work with our stakeholders and partners to keep our
employees, communities and host countries safe.
As long as the pandemic remains a risk to our people, we will
continue to support the Lesotho Government in its efforts
to combat the virus and will follow emerging medical and
scientific research to inform our safety practices on site to keep
our people safe and our operations open.
Material matters
Our approach
PROVIDING A SAFE WORKING ENVIRONMENT
Our context
Letšeng is the highest diamond mine in the world and the
remoteness and extreme natural environment contributes to
extreme operating conditions. We therefore experience unique
occupational health and safety challenges requiring specialist
knowledge, rigorous planning and exceptional leadership to
embed a culture of zero harm.
Our approach
Believing that every injury is preventable, our goal of zero harm is
underpinned by a culture of care and accountability that is driven by
each employee and advocated for by every leader. We do not only
classify a safety incident based on its impact on people or property,
but more importantly on its potential for impact or injury. Every safety
incident and near miss must be reported and appropriately investigated
to implement effective corrective actions and prevent future incidents.
Following an increase in the frequency of safety incidents
in the first half of 2021, leadership halted all operations at
Letšeng for 24 hours to launch a focused safety campaign
aimed at understanding the root causes of the recent safety
performance and identify appropriate preventative measures.
These discussions with the workforce during the shutdown
informed a safety intervention programme, which resulted in an
improved safety performance during the second half of the year.
More information on the various safety interventions, including
our organisational safety perception survey and formation of our
‘Grey Hair Council’ can be found in the safety case study page 61.
We take a firm stand against non-compliance with our high
safety standards for employees, contractors and sub-contractors.
Non-compliance leads to disciplinary action against employees
(including dismissal) and contractors (including blacklisting and
banning offending contractor employees from site).
Our performance
• AIFR: 0.93 (2020: 0.76).
•
•
•
Zero fatalities (2020: zero).
Six LTIs across the Group during 2021 (2020: one), resulting in
a Group-wide LTIFR of 0.24 (2020: 0.04).
1 restricted work injury (RWI) across the Group during 2021
(2020: four).
• US$0.7 million spent on ongoing COVID-19 protocols
to protect our employees and contractors (2020:
US$1.1 million).
•
ISO 45001 certification retained at Letšeng.
ATTRACTING AND RETAINING QUALIFIED PEOPLE
Our context
Skills shortages in the mining sector, exacerbated by our remote
location as we strive to employ local people, elevates our focus
on being an employer of choice. Gem Diamonds therefore
invests considerable resources in attracting and retaining talent,
skills, expertise and experience.
Our strength is in the quality of our people. To attract and retain
talented individuals, we must understand and address employee
needs, offer market-related salaries, cultivate a supportive working
environment and offer career development opportunities.
We understand that frequent engagement and communication
is critical to cultivating a collaborative working environment that
facilitates the development and retention of employees. Since
the onset of the COVID-19 pandemic, we have engaged regularly
with our people to understand their needs.
in
We recognise that competitive remuneration plays a significant
role in attracting and retaining qualified people. We remunerate
our employees
line with market-related rates without
discrimination based on race or gender. We also ensure that our
lowest-graded employees are remunerated above the minimum
wage of the host country. While Lesotho and Botswana do not
prescribe a minimum wage for the mining sector, we use the
construction industry wage guidelines as the standard. We
also ensure that minimum requirements for remuneration are
stipulated in our labour contracts.
In total, 9.9% of the workforce at Letšeng was compensated at
the operation’s minimum wage (2020: 3.4%). In 2021, the lowest-
graded permanent employees at Letšeng received 55.6% above
the construction sector’s minimum wage (2020: 54%). Other Gem
Diamonds employees are remunerated above the minimum
wage in line with market-related rates.
We provide benefits and incentives over and above basic
remuneration to attract and retain top talent. Incentives retain
key individuals through performance-based bonuses and long-
term share awards.
We have committees at Group and subsidiary levels to review
current remuneration policies, skills and succession planning.
Furthermore, non-financial metrics are included in employee and
leadership scorecards in line with sustainability goals. Refer to the
remuneration report for more information.
Of our permanent workforce at Letšeng, 93% of employees
subscribe to the mandatory government retirement provision
scheme. Letšeng contributes 7.5% of employees’ annual salaries
to this scheme and employees contribute 7.5%. The remaining
7% comprises fixed-term contract employees who are not eligible
for this benefit but paid a fixed-term contract allowance at 20%.
Employees at our Ghaghoo mine receive a statutory payment
upon contract completion, equal to 15% of basic monthly salary
for each month of employment.
South Africa and London-based employees are remunerated on
a cost-to-company basis, enabling them to elect their retirement
schemes and contributions. At our Belgian operations, employees
contribute 25% of their salaries to a mandatory government
retirement scheme (2020: 25%).
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SUSTAINABILITY CONTINUED
SUSTAINABILITY CONTINUED
Our performance
•
•
353 employees (2020: 357) and 1305 contractor employees (2020: 1 535) at year end.
The average number of employees was 354 (2020: 377) and the average number of contractor employees was 1 317 (2020: 1 466).
• US$37.4 million was spent on employee wages, benefits and incentives (2020: US$31.8 million).
•
•
•
The Group-wide absenteeism rate was 4.5 days per person (2020: 1.8 days).
2.3% Group-wide voluntary staff turnover (2020: 6.1%).
Zero cases of discrimination were recorded (2020: zero).
Employee demographics (%)
2021
Board
Senior
management
Middle
management
Total
2020
Board
Senior
management
Middle
management
Total
Male
Female
71
72
79
78
29
28
21
22
Local
43
100
89
98
<30
31-50
0
0
6
7
0
67
75
76
Male
Female
Local
<30
31-50
86
67
81
80
14
33
19
20
29
78
85
98
0
0
7
10
29
67
85
77
>50
100
33
19
17
>50
71
33
8
13
PROVIDING SKILLS DEVELOPMENT OPPORTUNITIES
FOR EMPLOYEES
Our context
To remain competitive, we require exceptional people. While we
invest in recruiting specialist skills as required, we also empower
Gem Diamonds employees to further their careers by providing
learning and development opportunities.
Our approach
focused succession planning
We invest in the training and development of our employees
and identify skills shortages to implement relevant development
programmes as well as
for
employees. We train and develop our employees through various
internal and external programmes, and have a well-established
mentorship culture. All employees have clear development plans
that incorporate key competencies. These plans are monitored
regularly with annual performance reviews to ensure our people
are engaged and meet business objectives.
Formal policies support our succession planning. In 2021, these
policies were reviewed in depth, updated, enhanced and aligned
to the Board’s commitment to diversity and inclusion.
In addition to on-site technical training, we have implemented
a strategy to support our commitment to skills development.
Our internship programme, which has been in place since 2009,
focuses on offering practical field experience for new graduates.
To date, we have had 48 graduates with 53% offered permanent
employment. Our scholarship programme provides current
and future employees the opportunity to study at recognised
institutions. Since the programme’s inception in 2006, Letšeng
has awarded 48 scholarships to young Lesotho citizens to study
mining, engineering, emergency medical care and finance. The
appointment of our heads of operations and finance at Letšeng,
both graduates of our Gem Diamonds development process, was
a highlight of 2021. During the year, we also developed an on-site
leadership coaching programme that will be rolled out in 2022.
•
Senior management training: 209 hours (2020: 176 hours)
• Middle management training: 4 503 hours (2020: 1 136 hours).
• Non-management training: 28 982 hours (2020: 5 092 hours).
•
•
•
14% of employee career reviews performed (2020: 16%).
20% of female employees received reviews (2020: 17%).
11% of male employees received reviews (2020: 19%).
ENSURING OUR EMPLOYEES REMAIN HEALTHY
Our context
Improving employee health and wellness increases morale,
reduces absenteeism and improves productivity. As our mines
are in extreme locations with limited public infrastructure, we
rely on our on-site clinics to provide the necessary emergency,
occupational and primary healthcare for our employees. We also
prioritise our employees’ mental well-being through tailored
counselling and engagement programmes.
Our approach
We strive to provide an environment that actively encourages and
supports employee well-being and healthy lifestyles. Effective safety
policies and processes reduce risks, strengthen our relationships with
employees and regulators, and safeguard the Group’s reputation.
All new employees complete a full medical examination during
induction. Similarly, when an employee departs, we perform an exit
medical examination.
Our primary healthcare and total occupational disease cases were
lower than previous years. No cases of malaria or cholera were
reported at our operations for the fourth consecutive year.
At the onset of COVID-19, we began implementing our precautions
to ensure the welfare of our workforce. COVID-19 protocols and
prevention measures are adjusted as the pandemic progresses.
We implemented active COVID-19 testing at Letšeng to screen
and monitor people entering the site. In addition, people showing
symptoms of the virus are immediately isolated, assessed and safely
transported to their homes or a regulated medical quarantine
facility.
An enhanced physical and mental health programme supports our
workforce in coping with additional pressures during this period. A
mental health practitioner was employed by our Letšeng this year
and we contracted ICAS for our Johannesburg employees. ICAS is a
leading provider of employee wellness services.
As many of our employees and their families reside in our local
communities, we also understand the importance of protecting
our surrounding communities. We continued our efforts to support
the Government of Lesotho in their fight to curb the spread of
COVID-19. Refer to the social section on page 77 for our progress
in 2021.
Fully equipped clinic at Letšeng to deal with on site and
occupational medical needs.
ENGAGING WITH EMPLOYEES AND ELECTED
REPRESENTATIVES
Our context
We seek to maintain and consistently improve engagement and
communication with our workforce to understand their needs
and challenges and to enhance workforce relations. Our Letšeng
operation remains non-unionised while Ghaghoo became
unionised in 2016.
Our approach
Our approach to employee engagement continues to evolve in
line with best practice and our unique circumstances.
Non-Executive Director Mazvi Maharasoa
leads employee
engagement, ensuring that employee concerns are heard at
Board level. Engagements in 2021 included an open forum
discussion with employees identifying their representatives.
to
free
We maintain a freedom of association policy, and our employees
are
join unions and other collective-bargaining
organisations. We aim to swiftly address employee grievances
and proactively engage with our employees and their elected
representatives to facilitate this. We have established policies and
procedures to guide our operations. Our policy provisions are
based on our detailed change management system and the host
country’s legislation. We ensure that our employees are notified
of significant or material changes to the operations or working
environments through these established policies and procedures.
Our management team also provides frequent engagement with
our workforce through multiple forums, including daily toolbox
talks, weekly visible felt leadership visits, town hall meetings
(subject to COVID-19 protocols) and weekly newsletters.
This year, our engagements highlighted the need to optimise our
employees’ shift rotations to maximise their time at home. Letšeng
operates continuously with shift configurations in line with local
legislative requirements, and operational and market demands.
We endeavour to ensure the safety of our workforce during shift
rotations and strive to minimise shift disruptions. Following the
‘Stop for Safety’ engagements in 2021, an alternative schedule
was requested, assessed, successfully piloted and implemented.
We are satisfied that adequate mechanisms are in place to
record and address workforce’ grievances, and we maintain good
relationships with our workforce and relevant bodies. Refer to our
stakeholder section for more information on our engagements
with employees.
•
•
•
•
99% of employees fully vaccinated to date.
Our performance
100% pre-employment medical examination rate at Letšeng
(2020: 100%).
•
Zero strikes or lockouts were recorded in 2021 (2020: zero).
• Constructive engagement with employee representatives
100% exit medical examination rate at Letšeng (2020: 100%).
continued in 2021.
• Decrease in occupational health cases to 348 (2020: 503).
•
7 232 serious disease prevention and management
interventions (2020: 3 611).
Our performance
Our performance
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87
GOVERNANCE
CHAIRPERSON’S INTRODUCTION TO
CORPORATE GOVERNANCE
FOCUS AREAS 2021
At Gem Diamonds, we take our responsibility as the public stewards
of the interests of shareholders seriously. In 2021, the Board focused
on further improvement of our corporate governance processes
and policies. Throughout the COVID-19 pandemic, our vision and
the way we do things (refer to page 3) has allowed us to continue
operating, despite the challenges presented. The Board’s and
Committees’ primary focus areas included:
•
Ensuring sustainable operations, keeping employees
and local communities safe and supporting the Lesotho
Government during COVID-19.
• Advancing the organisational safety culture and reducing
safety incidents.
•
Resolving certain shareholder concerns regarding the Board’s
independence.
• Overseeing the Group’s renegotiated funding arrangements.
• Overseeing TCFD adoption and implementation across the
Group.
•
Enhancing the risk management systems and processes.
• Overseeing the pending sale of Ghaghoo mine.
• Maintaining disciplined financial control.
• Considering an appropriate capital return to shareholders.
•
Refinement of risk management processes including
insurance risk transfer opportunities.
• Consideration of conceptual underground expansion
studies.
• Overseeing the delivery of CSI commitments and activities.
• Overseeing the implementation of the Group’s insurance risk
transfer strategy.
“Strong governance and
governance processes have
ensured our smooth operations
throughout the pandemic.”
– Harry Kenyon-Slaney –
Gem Diamonds Limited Annual Report and Accounts
Gem Diamonds Limited Annual Report and Accounts
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89
CHAIRPERSON’S INTRODUCTION TO CORPORATE GOVERNANCE
CONTINUED
CHAIRPERSON’S INTRODUCTION TO CORPORATE GOVERNANCE
CONTINUED
Factoring others into decision-making
Fair shareholder
engagement
•
Engagement page 17
• Conflict of interest page 98
Ethical business
conduct
• Culture, values and
purpose page 3
• Anti-bribery and
corruption page 96
• Human rights page 96
•
Tax Policy page 58
Ethical business conduct
•
TCFD page 26
• UN SDGs page 69
Unearthing unique
possibilities
s172
Long-term consequences
• Capital allocation page 53
•
•
Business model page 8
Risk appetite and risk
page 37
Employee interests
•
Engagement page 19
• Diversity page 103
•
Remuneration page 118
Other stakeholder
interests
• Other engagement
page 17
•
•
Supply chain page 20
Payments to
governments page 212
PRINCIPAL DECISIONS 2021
Refer to our Committee reports on pages 106 to 143, which
give more detail regarding the major decisions taken by Board
Committees as part of their mandate of support to the Board.
GOVERNANCE
Throughout the year ended December 2021, the Group has
been in compliance with the provisions set out in the 2018 UK
Corporate Governance Code. Gem Diamonds has consistently
applied the principles of good governance contained in the
Code and voluntary disclosures in relation to the Miscellaneous
Reporting Regulation during the year. Further information on our
compliance with the provisions of the Code is available in our
2021 Compliance Statement on page 90.
TRANSPARENT REPORTING
The Board and reporting team have applied their minds to ensure
the Annual Report and Accounts 2021 is transparent and provides
meaningful disclosures on our activities and values. We welcome
any feedback or further information requests.
FUTURE FOCUS AREAS 2022
The primary Board focus for 2022 is the continued health and
safety of our workforce and PACs as we manage the impact of
COVID-19. We will be guided by the Sustainability Committee
on how our stakeholders’ needs are evolving in response to the
pandemic.
As climate change moves to the centre of the corporate agenda,
we will continue to monitor our climate and environmental impact.
We are attuned to the need to reduce our energy consumption
and related greenhouse gas emissions and investigate cleaner
energy solutions to improve the environmental performance of
the business. We will also continue with the implementation of
Phase 2 of our TCFD roadmap.
Our Audit and Risk Committee will focus on improving its
oversight into risk practices and financial controls.
Succession planning for both Board and Executive Management
will remain a focus. We recognise the inherent value in diversity
and having a range of perspectives, aptitudes and experiences.
We continue to track the diversity of culture, gender and skills
across the Group.
Details of the Board’s formal annual evaluation of its own
performance, the performance of the Board Committees and
individual Directors are available on page 103. Outcomes will be
actioned in 2022.
We recognise that we are guests of the Lesotho Government and
engagement with this important stakeholder is a constant Board
focus. We will therefore maintain constructive, open and honest
dialogue with the Government of Lesotho.
FURTHER ENGAGEMENT
My fellow Board members and I will be available at the 2022 AGM
on 8 June 2022 to respond to any questions our shareholders may
have on this report or on any of the Committees’ activities and I
look forward to welcoming those of you who are able to attend.
If you wish to discuss any aspect of our governance
arrangements, please contact me via our Company Secretary at
ir@gemdiamonds.com.
HOW WE PERFORM OUR DUTIES
The main methods used by the Directors to perform their duties
include:
STRATEGY
The Board oversees, interrogates and approves the annual
strategy review, which considers the concerns of key stakeholders
and developments in regulations, governance requirements,
current market conditions and the short-, medium- and long-
term outlook (refer pages 22 to 25).
RISK MANAGEMENT
The Board oversees and has ultimate responsibility for the Group’s
risk management processes, ensuring that key risks are properly
identified, assessed, mitigated and monitored.
SUSTAINABILITY COMMITTEE
Provides assurance to the Board that appropriate systems
and policies are in place to identify and responsibly manage
sustainability-related matters.
EXTERNAL ASSURANCE
Provided by audits and certification in terms of international
management systems.
ORGANISATIONAL CULTURE
The Board sets the ethical tone for the Group and ensures that the
organisational culture aligns with our purpose and values.
STAKEHOLDER ENGAGEMENT
The Board monitors stakeholder engagement to ensure the
Group is cognisant of key stakeholders’ main concerns and
interests (refer pages 17 to 21).
SECTION 172(1) STATEMENT
The Board of Directors confirms that during the year under
review, it has acted to promote the long-term success of
the Company for the benefit of shareholders, while having
due regard to the matters set out in section 172(1)(a) to (f )
of the Companies Act, 2006, being:
(a) the likely consequences of any decision in the long
term;
(b) the interests of the Company’s employees;
(c) the need to foster the Company’s business
relationships with suppliers, customers and others;
(d) the impact of the Company’s operations on the
community and the environment;
(e) the desirability of the Company maintaining a
reputation for high standards of business conduct;
and
(f ) the need to act fairly between members of the
Company.
Harry Kenyon-Slaney
Chairperson
16 March 2022
2021Presenting the Gem Diamonds Annual Report and Accounts 2021 | Strategic report | Performance reviewGovernance | Directors’ report | Financial statements | Report on payments to governments | Additional informationGem Diamonds Limited Annual Report and Accounts 90
Presenting the Gem Diamonds Annual Report and Accounts 2021 | Strategic report | Performance review
Governance | Directors’ report | Financial statements | Report on payments to governments | Additional information
91
GOVERNANCE AT A GLANCE
Governance is a system and process, not a single activity, and requires a
systematic approach that incorporates strategic planning, risk mitigation and
performance management.
GOVERNANCE AT A GLANCE CONTINUED
GOVERNANCE FRAMEWORK
The Board
HIGHLIGHTS AS AT 31 DECEMBER 2021
Board and committee meeting attendance
Board independence
100%
50%
Board ethnic minorities
Board gender diversity
29%
29%
UK CORPORATE GOVERNANCE
CODE – COMPLIANCE
STATEMENT
The Board confirms that for the year ended
31 December 2021, the Principles of good corporate
governance contained in the 2018 UK Corporate
Governance Code (the Code) have been consistently
applied. The Company fully complied with all the provisions
of the Code. Page 94 illustrates how the Governance
section has been structured around the Principles
contained in the Code.
MAJOR BOARD DECISIONS
•
Review of the appropriateness of incentive calculations.
• No political donations during 2021.
• Continued capital allocation to COVID-19 response.
•
Review of the restructuring of insurance arrangements.
• Adopting the recommendations of the TCFD and
overseeing the implementation of the first phase of
the TCFD adoption roadmap.
•
•
Reviewing the underground mining plan programmes.
Review of the new funding and security arrangements.
KEY GOVERNANCE ACTIVITIES
•
Supporting and overseeing management’s response to COVID-19.
• Monitoring the Group’s cash preservation and cash generation initiatives.
• Overseeing, interrogating and approving the annual strategy review.
•
Reviewing and debating key risks and mitigating actions with management.
• Overseeing progress achieved in the BT and CI programmes.
• Assessing significant estimates and judgements applied in the valuation of the carrying value of mining assets and
impairment testing in the context of the impact of COVID-19 on pricing and production capability.
• Overseeing the advancement of sustainability objectives throughout the Group.
• Overseeing progress with the adoption of TCFD recommendations and the Group-wide CCSA.
• Overseeing alignment with the ICMM's GISTM.
• Overseeing diversity and inclusion throughout the organisation.
• Overseeing and supporting management’s engagements with funders to refinance Group debt.
The Board is responsible for the overall conduct of the Group’s business, with its primary focus as follows:
•
•
•
•
•
Setting the Group’s purpose and values, establishing the overall strategy and satisfying itself that these are aligned
with the Group’s culture.
Ensuring the employee policies and practices are consistent with the Group’s values and support its long-term success, and
regularly assess and monitor the Group’s culture.
Establishing procedures to manage risk and oversee the internal control framework.
Considering the views of shareholders and other key stakeholders when making decisions.
Ensuring adequate succession planning.
• Approving changes to the Group’s capital and corporate structure.
• Determining the remuneration policy.
• Monitoring the effectiveness of and reporting on corporate governance.
Our strategy
page 22
Our principal
risks and
uncertainties
page 37
S172 statement
page 89
Delegation of certain matters to Board sub-committees
Delegation of certain matters to Board sub-committees
There are six formally constituted Committees of the Board, each of which has specific terms of reference.
Nominations
Committee
(page 106)
Sustainability
Committee
(page 109)
Remuneration
Committee
(page 118)
Standing and Share
Scheme Committee
Facilitate the
administration of the
Board’s delegated
authority.
Audit
Committee
(page 113)
Reviewing and
monitoring:
• The integrity of the
financial and narrative
statements and other
financial information
provided to
shareholders;
• Ensure a formal,
rigorous and
transparent procedure
for the appointment
of new directors to the
Board;
• Lead the process for
Board appointments;
• The Group’s system of
internal controls and
risk management;
• Ensure Board
composition is regularly
reviewed and refreshed;
• The internal and
• Oversee the
external audit process
and auditors; and
• The processes for
compliance with laws,
regulations and ethical
codes of practice.
development of a
diverse pipeline for
succession; and
• Work and liaise in
respect of any
remuneration package
to be offered to any
new appointment of
the Board.
• Promote a culture of
zero harm and
responsible care;
• Minimise
environmental impact
and reduce resource
consumption;
• Achieve the goal of
sustainable
development; and
• Review and monitor
the Group’s approach,
policies and measures
on health, safety,
corporate social
responsibility and the
environment.
• Ensure remuneration
policies and practices
are designed to support
strategy and promote
long-term sustainable
success and reward
fairly and responsibly,
with a clear link to
corporate and
individual performance,
having regard for
statutory and
regulatory
requirements; and
• Ensure executive
remuneration is aligned
to purpose, values and
attainment of
long-term strategy.
The Board delegates the execution of strategy and the day-to-day management of the business to the Executive directors and management
Executive directors and management
Executive directors and management
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93
DIRECTORATE AND EXECUTIVE MANAGEMENT
DIRECTORATE AND EXECUTIVE MANAGEMENT
DIRECTORATE AND EXECUTIVE MANAGEMENT CONTINUED
1
2
3
4
5
6
7
8
9
10
1. HARRY KENYON-SLANEY (61)
2. MICHAEL LYNCH-BELL (68)
6. CLIFFORD ELPHICK (61)
7. MICHAEL MICHAEL (51)
Independent non-Executive Chairperson
BSc Geology (Southampton University),
International Executive Programme
(INSEAD France)
Chairperson
Member
Member
3. MIKE BROWN (61)
Independent non-Executive Director
BSc Engineering; Mining PR Eng (ECSA)
Engineering (University of Witwatersrand); Strategic
Executive Programme
(London Business School)
Chairperson
Member
Member
5. ROSALIND KAINYAH (64)
Independent non-Executive Director
BA (Hons) (University of Ghana), LLB (Hons) (University of
London), LLM (University College, University of London),
Member of the Bar of England & Wales (Gray’s Inn),
MCIArb
Member
Member
Member
Independent non-Executive Director
Chief Executive Officer
Chief Financial Officer
BA Hons Economics and Accountancy (University of
Sheffield); FCA of the Institute of Chartered Accountants
in England and Wales
BCom (University of Cape Town); BCompt Hons
(University of South Africa)
BCom Hons (Rand Afrikaans University); CA(SA)
Chairperson
Chairperson
Member
4. MAZVI MAHARASOA (52)
Non-Executive Director
LLM International and Commercial Law
(University of Buckingham)
Member
8. GLENN TURNER (61)
Chief Legal and Commercial Officer and
Company Secretary
BA; LLB (University of Cape Town); LLM (Cambridge)
9. BRANDON DE BRUIN (50)
Chief Operating Officer
BCom; LLB (University of the Witwatersrand);
Attorney (South Africa) and Solicitor
(England and Wales)
10. JACO HOUMAN (47)
Senior Manager - Technical and Projects
B.Eng(Met) (University of Pretoria); MBA (University of
Witwatersrand Business School)
Committee icons
Audit
Remuneration
Nominations
Sustainability
Non-Executive Directors
Executive Directors
Executive Management
2021
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95
CORPORATE GOVERNANCE STATEMENT
CORPORATE GOVERNANCE STATEMENT CONTINUED
HOW THIS SECTION IS
STRUCTURED
The Governance section aligns with the structure and Principles
(A to R) of the 2018 UK Corporate Governance Code (the ‘Code’)
and illustrates how we have applied the Code Principles and
complied with the provisions.
1
A
B
C
D
E
2
F
G
H
I
3
J
K
L
4
M
N
O
5
P
Q
R
Board leadership and Group purpose
Pages 94 to 96
Effective Board
Purposes, values and culture
Governance framework and Board resources
Stakeholder engagement
Employee policies and practices
Division of responsibilities
Pages 96 to 101
Board roles
Independence
External commitments and conflicts of interest
Key activities of the Board in 2021
Composition, succession and evaluation
Pages 102 to 104
Changes to the Board
Board skills, experience and knowledge
Annual Board evaluation
Audit, risk and internal control
Pages 104 to 105
Financial reporting
External auditor
Internal audit
Review of the Annual Report and Accounts 2021
Internal financial controls
Risk management
Remuneration
Page 105
Linking remuneration with purpose and strategy
Remuneration Policy review
Performance outcomes in 2021
Strategic targets
BOARD LEADERSHIP AND GROUP
PURPOSE
Effective Board
The Board comprises a range of relevant skills, knowledge and
perspective, with extensive collective experience in the mining
industry (refer to page 102). The Board’s focus areas (refer to
page 87) support the guidance of the Code by promoting the
long-term sustainable success of the Group, generating value for
all stakeholders and contributing to wider society.
The Board oversees, interrogates and approves the annual strategy
prepared by Executive Management. This year’s review took place
in November 2021 and assessed the continuing relevance of the
strategy in the current local and global context, the potential
impact of current and emerging risks (refer to page 37) and the
appropriateness of the current business model (refer to page 8)
for long-term value creation.
Key areas discussed by the Board during the strategy review
included:
• Alignment of the strategic priorities with the Group’s
purpose, vision, values and culture.
•
The strategy’s contribution to the achievement of the
Group’s vision in 2021, including its meaningful, sustainable
contributions to the countries in which we operate.
• Climate-related risks and consideration of the short-,
medium- and long-term impact on future decision-making,
strategy and business planning considerations and financial
implications.
• Updates on the performance of the diamond market and
Gem Diamonds’ position in the diamond industry.
• Opportunities to unlock value across operations and
commodities, operational structure, capital restructuring, use
of technology, revised mine planning, cost efficiencies and
strategic partnerships.
•
Review of corporate activities.
The Board is supported by the Board Committees, which focus on
specific areas of the business (refer to page 91) and report back
to the Board through their chairs to ensure that Board meetings
use time effectively.
Purpose, values and culture
A number of metrics are utilised to monitor workplace culture,
providing information on the collective experience within the
organisation and the prevalent patterns of behaviour to inform
areas for future focus. During the year, the Board and senior
management continued to promote the Company’s sustainable
success by reinforcing the purpose, values and goals and
ensuring they remain relevant and aligned with strategy metrics
to monitor culture including turnover and absenteeism rates,
training data, recruitment reward and promotion decisions,
whistleblowing, grievance and ‘speak-up’ data, Board interaction
with senior management and workforce, and health and safety
data. Refer to workforce engagement on page 19 to read how
the Board monitors company culture through regular employee
engagement.
Governance framework and Board
resources
The Group’s corporate governance framework and processes
provide effective oversight of the business to ensure long-
term value creation and benefit for all stakeholders. Strategy
development and execution is supported by:
• Clear lines of accountability and responsibility.
•
•
•
Linking the strategic priorities to KPIs that can be tracked to
monitor delivery on the strategy.
Regular feedback and sharing of information to inform
timeous decisions.
Engaging with key stakeholders to ensure their concerns
and interests are included where relevant (refer to page 17).
• Maintaining an effective risk management framework
(refer to page 37) aligned with the Group’s strategy and
performance objectives, and supported by comprehensive
internal controls and regular assurance.
•
Independent insight and knowledge from the non-Executive
Directors.
Clear information flows have been established between the Board
and Executive Management which allows greater time at Board
meetings to focus on strategy and key decisions. The information
supplied to the Board aims to provide the depth necessary for
effective debate without being excessive. Where relevant, the
person responsible for the report attends the Board meeting to
provide further information and give Directors the opportunity to
develop a deeper understanding of the issue. Presentations from
external subject matter experts in relevant areas expose Directors
and Executive Management to a broader range of views.
INDEPENDENT ADVICE
The Directors have access to Executive Management and the
advice and services of the Company Secretary. The Company
Secretary is accountable to the Board for compliance with all
governance matters and assists with professional development
as required.
All Directors, either independently or collectively, may take
independent professional advice at the expense of the Company,
in the conduct of their duties, subject to prior consultation with
the Chairperson.
COMPANY SECRETARY
The Company Secretary has access to an independent firm of
Chartered Secretaries in Public Practice (Bruce Wallace Associates)
to ensure all company secretarial and governance issues are
attended to and the Board is apprised of all compliance and best
practice matters throughout the year.
PROTECTION
In line with the Company’s Articles of Association, the Company
has, and continues to maintain, indemnities granted by the
Company to the Directors of the Company and the Company’s
associated companies, to the extent permitted by and consistent
with BVI law and the UK Companies Act, 2006 and rules made by
the UK Listing Authority. Neither the insurance nor the indemnity
provide cover where the Director or Group employee has acted
fraudulently or dishonestly.
Stakeholder engagement
The Board recognises the importance of effective communication
and seeks to maintain open and transparent relationships with
all its stakeholders. Pages 17 to 21 contains a detailed analysis of
stakeholder engagement during 2021.
ANNUAL GENERAL MEETING
Due to restrictions on travel and public gatherings at the time,
the 2021 AGM took place as a closed meeting. The meeting
addressed the formal resolutions in the notice of meeting and
shareholders were invited to submit questions in advance. Voting
on all resolutions was conducted by poll vote. The results of
the resolutions were announced through the Regulatory News
Services and on the Company’s website.
In accordance with the Code, if any resolution put to shareholders
receives over 20% votes against, the Board will seek to actively
engage with investors to understand their concerns and publish a
report on the actions taken and any next steps within six months
of the meeting. As discussed on page 18, at the 2021 AGM three
resolutions received more than 20% votes against them and
members of the Board and the Executive Management team
engaged with one of the Company’s larger shareholders on the
concerns raised. This is the second consecutive year that these
resolutions were not passed; however, due to the standing policy
of the shareholder on these matters, it is unlikely to be resolved.
The Company released an updated statement in December 2021
on actions taken in response to the votes received, which can be
viewed on the Company’s website
www.gemdiamonds.com.
The 2022 AGM will be held on Wednesday 8 June 2022. It will be
held both virtually and in person, if permitted by the prevailing
COVID-19 restrictions at the time. Details of the resolutions to
be proposed at the AGM can be found in the Notice of AGM,
which will be published on the Company’s website and sent to
shareholders who requested to continue to receive paper copies
a minimum of 20 business days before the meeting. Shareholders
who receive electronic communications can access the Annual
Report and Accounts 2021 and the AGM documentation through
the Company’s website.
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CORPORATE GOVERNANCE STATEMENT CONTINUED
CORPORATE GOVERNANCE STATEMENT CONTINUED
CHAIRPERSON AND CHIEF EXECUTIVE OFFICER
The respective responsibilities of the Chairperson and the Chief Executive Officer are clearly defined and separate, ensuring a clear division
of responsibilities between the leadership of the Board and the executive leadership of the Company’s business. The Chairperson is
responsible for creating the conditions for the effective working of the Board. The Chief Executive Officer is responsible for the leadership,
operations and management of the Group within the strategy and business plan agreed by the Board. Their individual responsibilities,
together with the responsibilities of the Senior Independent Director and non-Executive Directors, align with the requirements of the Code
and are detailed on the following pages.
Role of Chairperson
Harry Kenyon-Slaney
Role of Chief Executive Officer
Clifford Elphick
•
•
•
•
•
Provides effective leadership to the Board, ensures it
operates effectively and sets the highest standards of
corporate governance.
Provides strategic guidance to the executive team.
Sets the agenda, style and tone of Board discussions.
Through the Nominations Committee, ensures the Board
comprises individuals with appropriate skill sets, experience,
knowledge and diversity and that succession plans are in
place for the Board and senior management team.
Ensures the Company maintains effective communication
with shareholders and that the Board understands their
views and concerns.
•
•
• Works with the CEO to ensure the Board receives accurate
and timely information on the performance of the Group.
Leads the evaluation of the performance of the Board, its
Committees and individual Directors.
Encourages a culture of openness and discussion to foster a
high-performing collegial team of Directors.
Ensures relevant stakeholder and shareholder views, as
well as strategic issues, are regularly reviewed, clearly
understood and underpin the work of the Board.
Facilitates the relationship between the Board and the CEO.
Ensures adequate time is available for discussion on all
agenda items.
•
•
•
• Develops a business strategy for the Group to be approved
by the Board.
•
Produces business plans for the Group to be approved by
the Board.
• Oversees management of the executive resource and
succession planning processes and presents the output
from these to the Board and Nominations Committee.
•
Ensures effective business and financial controls and risk
management processes are in place across the Group, as
well as compliance with all relevant laws and regulations.
• Makes recommendations to the Board on the appropriate
delegation of authority within the Group.
•
Keeps the Board informed about the performance of the
Group and brings to the Board’s attention all matters that
materially affect, or are capable of materially affecting,
the performance of the Group and the achievement of its
strategy.
• Develops, for the Board’s approval, appropriate values and
standards to guide all activities undertaken by the Group.
•
Provides clear and visible leadership in responsible business
conduct.
Employee policies and practices
EMPLOYEE POLICIES AND INVOLVEMENT
The Group prioritises the health, safety and effective performance
of employees, as well as maintaining positive employee
relations. The Group encourages a direct relationship with open
communication between employees and management. Mazvi
Maharasoa, a non-Executive Director, is the Board’s representative
who engages with the broader workforce and provides direct
feedback to the Board on the key concerns raised. In 2021,
she chaired several meetings with employee representatives.
Matters raised during these meetings were addressed at Board
and management level and employees were kept informed
throughout the process. Employees are informed about the
Group’s performance and objectives through direct and ongoing
communication with management as well as the Company’s
website, published information, the circulation of press cuttings
and Group announcements.
Gem Diamonds is committed to achieving equality irrespective
of gender, religion, race or marital status, and equal opportunity
is a fundamental principle in the Group. Applications from people
with disabilities are welcomed for positions they can adequately
fill, having regard for their abilities and aptitude. Where existing
employees become disabled, it is the Group’s policy, where
practical, to provide continuing employment under normal terms
and conditions and to provide training, career development and
promotion to disabled employees wherever possible.
The Group aims to attract and retain top-calibre management
and employees by creating a work environment that incentivises
enhanced performance. Guidelines and frameworks covering
remuneration benefits, performance management, career
recruitment, expatriate
development, succession planning,
employment and
resources
management and policies have been implemented by the Group
and are in line with international best practice. Each operating
unit manages its human resources requirements locally, within
the Group’s guidelines and frameworks.
the alignment of human
The Modern Slavery Statement, in accordance with the Slavery
Act, is updated and published on the Group website annually.
BRIBERY ACT
The Group has a zero-tolerance approach to acts of bribery
and corruption involving any of its employees, third-party
representatives or associates and is committed to upholding
and complying with the requirements of the UK Bribery Act. The
Group’s terms of business require all customers and third parties
with whom business is transacted to adopt the same zero-
tolerance approach to bribery and corruption as implemented
by the Board. The Group anti-bribery and corruption policy is
currently being reviewed by the Board.
Refer to the Audit Committee report on page 113.
WHISTLEBLOWING PROGRAMME
Independently operated and confidential toll-free phone hotlines
are in place in each country where the Group operates. Online
submissions through gemdiamonds.ethicpoints.com can also be
done. Individuals can report any breach of the Group’s business
principles through these channels, including but not limited to,
bribery, breaches of ethics and fraud. A training and awareness
programme on the whistleblowing facility was rolled out at
Letšeng during the year.
All whistleblowing
incidents reported are referred by the
Group Internal Auditor or Company Secretary to the relevant
operations where they are fully investigated. The results of these
investigations are reported to the Boards of local operations and
the Audit Committee. Group Internal Audit periodically reviews
the design and effectiveness of the hotline and reports the results
to the Audit Committee.
During the year, a whistleblowing report was received alleging
diesel theft at Letšeng. Details of how this was managed can be
found in the Audit Committee report on page 113.
The Board is satisfied that the whistleblowing programme is being
used correctly by concerned individuals and that all queries raised
during the year have been properly investigated and reported.
DATA PROTECTION
The Group’s Privacy Policy can be found on its website at
www.gemdiamonds.com/privacy.php. A dedicated email address
is available for any correspondence relating to data protection
and privacy queries dataprotection@gemdiamonds.com which
is reviewed by the Chief Legal and Commercial Officer. No
correspondence was received during the year.
DIVISION OF RESPONSIBILITIES
Board roles
The governance framework on page 91 sets out the primary role
of the Board.
The Board meets regularly, covering strategic issues, such as
operational and financial performance, risk management and
other critical business concerns and has a formal schedule of
matters reserved for its decision. The agenda for each Board
meeting includes discussion, decision-making and sufficient time
and appropriate resource allocation surrounding these matters.
While all Directors have equal responsibility in terms of the law for
managing the Group’s affairs, Executive Management is responsible
for running the business within the parameters established by the
Board and for producing clear, accurate and timely information
and reports to enable the Board to monitor and assess the Group’s
performance. Financial and operational performance are reviewed
at each Board meeting and Directors receive regular updates
on the Group’s performance across a range of metrics. Regular
reports presented to the Board include health and safety reports;
CSI and stakeholder matters report, TCFD and climate-related risk
reports, risk management reports; tailings facility integrity reports;
operations reviews; sales and marketing reports; half-year and
full-year financial results; employee surveys; BT and CI status and
investor relations updates. Executive Management draws on the
expertise and experience of the non-Executive Directors.
Directors are encouraged to express their views freely and, where
they have concerns about the running of the Group or a proposed
course of action, they may ask that these be recorded in the minutes
where appropriate. No such concerns were raised during 2021.
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CORPORATE GOVERNANCE STATEMENT CONTINUED
CORPORATE GOVERNANCE STATEMENT CONTINUED
CORPORATE GOVERNANCE STATEMENT CONTINUED
Role of Senior Independent Director
Michael Lynch-Bell
Role of Non-Executive Directors
Key activities of the Board in 2021
Key activities of the Board in relation to various focus areas:
• Acts as a sounding board and provides support to the
Chairperson.
•
Serves as an intermediary for other Directors if necessary.
• Makes himself available to shareholders if concerns they
have raised with the executive team and/or the Chairperson
have not been satisfactorily resolved.
•
•
•
Leads the non-Executive Directors in the performance
review of the Chairperson.
Ensures there is a clear division of responsibilities between
the Chairperson and the CEO.
Plays a leading role in succession planning for the
Chairperson.
•
•
Scrutinise the performance of Executive Management in
meeting agreed goals and objectives and monitoring the
reporting of performance.
Review the integrity of financial information and determine
whether internal controls and systems of risk management
are robust.
• Determine the Company’s policy for executive
remuneration, as well as the remuneration packages for
the Chairperson and Executive Directors through the
Remuneration Committee.
Ensure a satisfactory dialogue with shareholders on strategy,
remuneration policy and other relevant matters as well as
engagement with key stakeholders.
Strengthen links between the Board and the workforce by
designating a non-Executive Director who, in conjunction
with management, develops and implements workforce
engagement initiatives and reports to the Board on relevant
matters, or issues of concern, highlighted by the workforce.
Provide a wide range of skills and independence, including
independent judgement on issues of strategy, performance
and risk management.
•
•
•
For more information on the roles of Board Committees refer
www.gemdiamonds.com/corporate-governance.php.
Independence
Non-Executive Directors are required to be independent in
character and judgement. In applying the independence test,
the Board considers relationships with Executive Management,
major shareholders, subsidiary and associated companies and
other parties with whom the Company transacts business against
predetermined materiality thresholds. The Board considers the
majority of the non-Executive Directors, i.e. Harry Kenyon-Slaney,
Michael Lynch-Bell, Rosalind Kainyah and Mike Brown, to be
independent in accordance with the Code. Mazvi Maharasoa brings
a wealth of skills and experience to the Board; however, under the
criteria of the Code, she cannot be considered independent due to
her previous role within the Group. Mazvi is only a member of the
Sustainability Committee. Our Nominations Committee Report on
page 106 discusses the matter in more detail.
The letters of appointment for the non-Executive Directors
and the contracts of the Executive Directors are available for
inspection at the place of business of the Company in London.
External commitments and conflicts of
interest
EXTERNAL COMMITMENTS
External commitments are detailed in the Directors’ CVs on
page 218.
CONFLICTS OF INTEREST
The UK Companies Act (the Act) requires Directors to avoid
any situation where they may have a direct or indirect interest
that conflicts, or may conflict, with the Group’s interests, unless
approved by the non-interested Directors. In accordance with this
Act, the Company operates a procedure, which was reviewed with
no changes by the Board in October, to ensure the disclosure of
conflicts and, if appropriate, the consideration and authorisation
of them by non-conflicted Directors. The Board maintains a
register of ‘conflicts of interest’ that it reviews annually (most
recently in November 2021). The Company voluntarily complies
with this requirement. The Board considered all external Directors’
appointments made during the year.
DEALINGS IN SHARES AND THE UK MARKET ABUSE
REGIME
The Company’s share dealing policy and reporting procedures
are in line with the UK Market Abuse Regulations implemented in
July 2016 and updated in June 2021.
RELATED-PARTY TRANSACTIONS
Other than those disclosed in Note 25 of the financial statements,
the Company did not have any transactions with, nor did it make
loans to, related parties during the period in which any Director
had any interest.
Operational
• Oversight of the Group’s response to COVID-19.
• Oversight of the organisational safety culture strategy implemented at
Letšeng.
•
•
Review of quarterly management reports on operational performance.
Review and approval of the 2022 business plan.
• Oversight of progress achieved in the BT and CI programmes.
• Oversight of TCFD adoption and climate change strategy development.
• Oversight of responsible tailings facility management and alignment with
ICMM's GISTM.
• Oversight of CSI strategy.
• Oversight of environmental conservation and stewardship performance.
•
Review of progress on technology initiatives.
• Updates on Mineral Resource Management and the mapping of resources.
Strategy and financing
• Annual strategy review in November 2021.
Risk management and
internal control
• Ongoing review of KPIs to assess delivery of strategy during the year.
• Monitoring of the Group’s cash-preservation and cash-generation initiatives.
• Oversight of the process of ensuring access to funding facilities and rolling
over debt falling due or expiring.
•
Review and approval of planned capital expenditure.
• Oversight of process to integrate climate change-related issues into strategy
planning.
•
•
•
•
•
Review of risk management processes and updated risk register, including
emerging risks.
Review of updates from the Audit Committee on internal control and
assurance functions.
Review of regular updates from the Sustainability Committee on the
identification and management of health, safety, environmental, community
investment and relationship, tailings and water storage facilities and climate
change-related risks.
Review of the impact of the increased risk perception of insurance markets
on risk management.
Review the implementation of an insurance risk transfer strategy.
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CORPORATE GOVERNANCE STATEMENT CONTINUED
CORPORATE GOVERNANCE STATEMENT CONTINUED
CORPORATE GOVERNANCE STATEMENT CONTINUED
Corporate and
performance reporting
•
Regular review of financial performance and position.
• Monitoring of cash flow forecasts.
•
•
Review of updates from the Remuneration Committee on key focus areas.
Review and approval of quarterly updates, interim results and final results
and the relevant announcements.
• Oversight of climate-related financial disclosures as recommended by the
TCFD.
•
Review and approval of 2020 Annual Report and Accounts, and the
Sustainability Report.
Governance
• Monitoring and maintenance of the separation of roles between the
Chairperson and CEO.
• Annual review and update of Committee terms of reference and evaluation
of Committee composition.
• Approval of appointments to the Board Committees.
•
Review and approval of updates to key policies.
• Oversight of succession plans for the Board and senior management.
•
•
•
•
•
Participation in annual evaluation of the Board, Committees and Directors.
Review of regular governance updates from the Company Secretary.
Review of matters reserved for the Board.
Review of Directors’ independence and conflicts of interest.
Engagement with significant shareholders and the Remuneration
Committee regarding the votes against resolutions 14, 15 and 16 at the
2021 AGM.
Stakeholder engagement
• Oversight of CSI strategy development and performance.
• Measuring the Group’s culture through a number of metrics, including
employee engagement through a designated non-Executive Director.
Refer to pages 17 to 21
MEETING ATTENDANCE
Four scheduled Board meetings were held during 2021. The
terms of reference for the Audit, Nominations, Sustainability
and Remuneration Committees can be viewed on the Group’s
website together with the matters reserved for the Board.
www.gemdiamonds.com/corporate-governance.php.
If Board approval is required between Board meetings, Board
members are emailed
including supporting
the details,
information for decision-making. The decision of each Board
member is communicated, recorded and ratified as necessary, at
the following Board meeting.
Director
Board:
4 held
Audit:
4 held
Remuneration:
4 held
Nominations:
4 held
Sustainability:
4 held
Executive Board members
C Elphick
M Michael
Non-Executive Board members
H Kenyon-Slaney
M Lynch-Bell
M Brown
J Velloza
M Maharasoa
R Kainyah
4/4
4/4
4/4
4/4
4/4
1/1*
4/4
3/3*
N/A
N/A
N/A
4/4
4/4
N/A
N/A
3/3*
N/A
N/A
4/4
4/4
1/1*
N/A
N/A
3/3*
N/A
N/A
4/4
4/4
4/4
N/A
N/A
N/A
N/A
N/A
4/4
N/A
4/4
1/1*
4/4
3/3*
J Velloza stepped down from the Board and the Sustainability Committee with effect from 1 May 2021.
R Kainyah was appointed to the Board and to the Remuneration, Audit and Sustainability Committees with effect from 1 May 2021.
* Full attendance of all meetings up to resignation from/since appointment to the Board or Committee on 1 May 2021.
NON-EXECUTIVE DIRECTORS’ MEETINGS
The non-Executive Directors meet independently of the Executive Directors, in accordance with the practice adopted by many listed
companies.
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CORPORATE GOVERNANCE STATEMENT CONTINUED
CORPORATE GOVERNANCE STATEMENT CONTINUED
COMPOSITION, SUCCESSION AND
EVALUATION
Changes to the Board
In 2021 the Board approved a formal Selection and Appointment
policy which ensures that the procedure for appointing new
Directors is formal, rigorous and transparent, and appointments
are made on merit, against objective criteria and with due regard
for the benefits of diversity on the Board.
Johnny Velloza stepped down from the Board with effect from
1 May 2021 to take up a technical consulting role in the Group
and Rosalind Kainyah MBE joined the Board as an independent
non-Executive Director from the same date.
The Board comprises a broad and highly relevant skill set, and
the Nominations Committee continues to make appointments
based on merit while considering diversity (of gender, social and
ethnic background), cognitive and personal strengths and the
specialist skill set required by the business. Further details are in
the Nominations Committee report on page 106.
Board Committee membership was amended during the
year to consider the changes to the Board and allocation of
appropriate skills to those Committees, also taking into account
independence.
RE-ELECTION
The Nominations Committee’s report is set out on pages 106 to
108. 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. Details of the Directors’ service contracts are
included on pages 126 and 128. The Nominations Committee
has considered and concluded that the Board has demonstrated
commitment to its role. The Committee is also satisfied that the
collective skills, experience, background and knowledge of the
Company’s Directors enable the Board and its Committees to
conduct their respective duties and responsibilities effectively.
Board skills, experience and knowledge
The Board conducts an annual review of the composition and
chairmanship of its primary Committees, namely the Audit,
Nominations, Sustainability and Remuneration Committees. The
Company complies with the requirement of the Code that there
should be a balance of Executive and non-Executive Directors so
that no individual or group can dominate the Board’s decision-
making.
As a mining company, the efficiency of the day-to-day operations,
in both the medium and long term, is essential to the Group’s
progress in producing shareholder value. Knowledge of the
diamond industry is crucial to fostering new business opportunities
and enhancing the Group’s sales and marketing strategies.
Knowledge of financial markets is also necessary to ensure
fulfilment of the Group’s strategy. The biographies, which can
be found on pages 92 to 93, provide more information on each
Director’s competencies. All Directors allocate sufficient time to
the Group to fulfil their responsibilities effectively.
The non-Executive Directors possess a range of experience and
competencies and bring independent judgement to bear on
issues of strategy, performance and resources that is vital to the
success of the Group.
Board skills and experience (%)
Senior executive
Core industry
International markets
Financial/Audit and Risk
Environmental/Social
M&A/Capital markets
Health and safety
Legal/Regulatory
Technical/Engineering
100%
81%
81%
67%
67%
62%
62%
57%
52%
BOARD DIVERSITY
The Board recognises the importance of the Hampton-Alexander reviews as well as the Parker reviews and their objective to improve
gender and ethnic diversity in executive leadership and senior management. Similarly, the Board is conscious of trends evidenced in the
Code to increase diversity in boardrooms. There is a focus from the Board on gender and ethnic diversity at Board level and in the succession
pipeline. The Group recognises the importance of diversity at all levels and the diversity and inclusion policy covers both Board diversity and
the Company’s approach across the organisation. The Board has steadily worked to increase diversity and has moved from a position of 0%
female and ethnic minority in 2018 to 29% female and ethnic minority on the Board in 2021. It is also significant that 98% of the total Group
workforce are Lesotho nationals and 22% of the total workforce is female.
GEM DIVERSITY AND INCLUSION STATISTICS
Female
Ethnic minority
Board
Senior
Management
Management
pipeline
29%
17%
41%
Board
Senior
Management
Management
pipeline
29%
50%
76%
Succession planning is a key priority across the Group with a
focus on the development of women and ethnic minorities into
leading roles, which drives a diverse pipeline of talent.
Further detail on the Group framework to succession planning
can be found in the Nominations Committee report on page 106.
More information on gender-based employment is contained in
the Sustainability Report.
TRAINING AND INDUCTION
A formal and tailored induction is provided to new Directors on
joining the Board. This includes meetings with management and
access to external auditors and covers the Board Committees they
join. In addition, ongoing support and resources are provided
to Directors to extend and refresh their skills, knowledge and
familiarity with the Group. Professional development and training
are provided through four measures:
•
•
•
•
regular updates on changes (actual and proposed) in laws
and regulations affecting the Company or its business;
planning, including site visits, to ensure Directors are familiar with
Group operations, including its commitment to and application
of the Group’s corporate and social responsibility policies;
creating opportunities for professional and skills training,
such as Committee chairmanship; and
appropriate Board presentations and formal professional
seminars.
SITE VISITS
Visiting the Group’s operations and interacting with senior
management and employees is an integral part of the Directors’
ongoing knowledge of the business. Travel restrictions limited
the opportunity for site visits since the start of COVID-19. Johnny
Velloza visited Letšeng in February and Mike Brown visited
Letšeng three times during the year. Executive Directors, Clifford
Elphick and Michael Michael each visited Letšeng once during
the year and Clifford visited the sales and marketing office in
Antwerp once in November.
Annual Board evaluation
In accordance with the Code, the Board is responsible for
undertaking a formal and rigorous annual evaluation of its own
performance and that of its Committees and individual Directors.
This year, an internal evaluation was conducted in December,
facilitated by Bruce Wallace Associates. The review was initiated
by the Board and arranged by the Nominations Committee
and covered both overall and individual performance as well
as effectiveness of the Board and its Committees. The review
took the form of a questionnaire based around a number of
themes, including the Board and Company’s response to events
of the preceding months, strategy formulation, stakeholder
engagement and
findings were
consolidated into a report which, along with recommendations,
was circulated to all Directors and discussed at the March 2022
risk management. The
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CORPORATE GOVERNANCE STATEMENT CONTINUED
CORPORATE GOVERNANCE STATEMENT CONTINUED
Board meeting. The overall findings from the evaluation were
positive and demonstrated significant progress on some of the
key findings from the previous year’s evaluation, such as the
implementation of a formal Board Selection and Appointments
policy and the appointment of Rosalind Kainyah to satisfy
the Board’s independence requirement. During 2021 there
was significant focus on succession planning and stakeholder
engagement and the outcome of the evaluation confirmed not
only this, but further highlighted the Board’s view that more can
be done in these areas during 2022.
The Board and Committees will implement the recommendations
from the evaluation in 2022.
AUDIT, RISK AND INTERNAL
CONTROL
Financial reporting
The Board is conscious of its responsibility to present a fair,
balanced and understandable assessment of the Group’s position
and prospects and is satisfied that the Strategic Report on pages
2 to 46 meets this obligation. The Responsibility Statement of the
Directors in respect of the Annual Report and Accounts 2021 is
set out on page 1.
Financial reporting to the Board is continuously modified and
enhanced to cater for changing circumstances. The Group’s
comprehensive planning and financial reporting procedures
include detailed operational business plans for the year ahead and
a three-year rolling plan, as well as consideration of sustainability
matters such as climate-related risks and opportunities as
recommended by the TCFD. The Board reviews and approves
the Group’s annual business plan, which is prepared in co-
operation with all Group functions based on specified economic
and sustainability assumptions. Performance is monitored and
relevant action taken throughout the year through monthly
reporting of KPIs and updated forecasts for the year, together with
information on key risk areas.
In addition, routine management reports, including results to date
and updated forecasts for the year, are prepared and presented to
the Board. Detailed consolidated management accounts, as well
as an executive summary, are circulated prior to each scheduled
Board meeting. Between Board meetings, summary update reports
covering matters such as operational performance, sustainability,
sales results, cash flow and progress on strategic issues are
circulated to Board members and senior executives.
External auditor
A principle of the Code is that the Board should establish formal
and transparent arrangements for considering how it should
apply the financial reporting and internal control principles and
for maintaining an appropriate relationship with the Group’s
external auditor, EY. These responsibilities are delegated to and
discharged by the Audit Committee.
The lead audit partner is based in Johannesburg, South Africa.
Further information regarding the appointment of EY SA is
detailed in the Audit Committee report on pages 113 to 117.
As required under section 418 of the Companies Act, 2006,
to which the Directors have voluntarily elected to conform,
each Director confirms that to the best of their knowledge and
belief, there is no information relevant to the preparation of the
Auditor’s Report of which the Company’s auditor is unaware and
the Directors have taken all reasonable steps to make themselves
aware of any relevant audit information and establish that the
Company’s auditor is aware of that information.
A resolution to reappoint EY SA as the Company’s auditor and to
authorise the Board to determine the auditor’s remuneration will
be proposed at the 2022 AGM.
Internal audit
The Group Internal Audit function, as an independent assurance
provider, is an important element of the overall process by
which the Audit Committee and the Board obtain the required
assurance that risks are being effectively managed and controlled
and the Group’s control environment is adequate and effective.
The Group Internal Audit function is provided through an in-
house Internal Audit team supplemented by external industry
experts when required. Group Internal Audit function reports
directly to the Audit Committee and is responsible for co-
ordinating the Group’s risk-based audit approach and evaluating
its effectiveness. The team contributes to the improvement of the
risk management process, control environment and governance
systems. Various ad hoc assignments are also performed during
the year at the request of management.
The risk-based audit plan, approved by the Audit Committee,
covers all operating units, focusing on the principal risks. It
involves discussions with management on the risks identified
in the subsidiaries’ and Group risk registers, emerging risks,
operational changes and capital projects. Findings and agreed
actions are reported to management and the Audit Committee.
Review of the Annual Report and
Accounts 2021
The Board, supported by the Audit Committee, is responsible for
ensuring the integrity and completeness of the Group’s Annual
Report and Accounts and Half-Year Report. The Board reviews the
reports and applies its collective mind to their preparation and
presentation to ensure they provide a fair, transparent, balanced,
understandable and appropriate representation of the Group’s
performance, strategy and material risks.
Internal financial controls
The Board is responsible for the Group’s overall approach to
risk management and internal control, which is embedded
in all key operations. In accordance with the Guidance on Risk
Management, Internal Control and Related Financial and Business
Reporting Guidance published by the FRC in September 2014,
the Board has defined the processes adopted for its ongoing
monitoring and assessment and relies on reviews undertaken by
the Audit Committee throughout the year. In addition, regular
management reporting and a balanced assessment of key risks
and controls is an important component of Board assurance.
The principal aim of the system of internal control is the management
of business risks that significantly threaten the fulfilment of the
Group’s business and strategic objectives, with a view to enhancing
the value of shareholders’ investments and safeguarding assets. To
support this aim, the Board adopted the TCFD recommendations
during 2021, providing a framework for the identification, disclosure
and management of climate-related risks. The internal control
systems have been designed to manage rather than eliminate the risk
of failure, to achieve business objectives, and to provide reasonable
but not absolute assurance that the Group’s business objectives will
be achieved within the risk tolerance levels identified by the Board.
The system of internal control includes the controls over compliance
with regulatory and legal requirements.
The Directors have reviewed the effectiveness of the system of
internal control. For the review, the Audit Committee considered
reports dealing with Internal Audit plans and outcomes, as well as risk
logs and management representations. The diesel theft at Letšeng
that was brought to the attention of the Audit Committee via the
whistleblowing programme evidenced a potential breakdown of
internal control. Details of how this was managed can be found in
the Audit Committee report on page 115. A full report of the work
carried out by the Audit Committee on behalf of the Board is set
out in the Audit Committee report on pages 113 to 117.
INVESTMENT APPRAISAL
Capital expenditure is managed through a budgetary process
and authorisation levels. For expenditure beyond specific levels,
detailed written proposals are submitted to the Board. The
approval procedure for investments includes funding options
and a detailed calculation of return based on current assumptions
that are consistent with those included in management reports.
Post-investment reviews are carried out after the project is
complete and, for material projects, steering Committees are
established to monitor the progress against the approved plan.
Details regarding the Group’s capital expenditure decisions
during 2021 are available in the CFO’s review on page 52.
Commercial,
legal and financial due diligence are carried
out, using external consultants as appropriate, in respect of
acquisitions and disposals.
Risk management
Risks are monitored continually and formally reviewed annually.
A more comprehensive report of the Group’s principal and
emerging risks and how these are managed and/or mitigated can
be found on pages 37 to 44 of the Strategic Report.
The Group’s operations perform regular risk assessment reviews and
maintain risk registers. Objectives in the business plan are aligned
with risks and a summary of the key risks, related internal controls,
accountabilities and further mitigating actions are tabled and
approved by the Audit Committee. The Sustainability Committee
provides assurance that sustainability-related risks, including health,
safety, environmental and climate are monitored and managed
appropriately. The Audit Committee at times delegates its authority
to the Board for completeness. The Audit Committee and the Board,
where appropriate, are kept informed on progress against the plans
and any significant changes to review the risk profile. This enables
the relevant management and non-Executive Directors to holistically
review the risk, mitigate it and implement controls as necessary.
The Board reviews risks and risk management at a stand-alone
quarterly risk review meeting that allows sufficient time to
fully explore risks and test management’s scenarios and plans.
During these meetings, the Board reviews the risk register and
interrogates the most critical risks in detail, debating mitigation
plans with management.
REMUNERATION
Linking remuneration with purpose and
strategy
The remuneration policy links executive remuneration to the
underlying health and performance of the Group through
relevant social and environmental indicators of performance. The
financial and non-financial KPIs used to measure performance
align with our strategy, which in turn supports the Group’s
purpose to Unearth Unique Possibilities.
Remuneration Policy review
the Board
responsible
independent non-Executive Directors,
DIRECTORS’ REMUNERATION
for Directors’
While
is ultimately
the Remuneration Committee, consisting
remuneration,
is responsible for
of
determining the remuneration and conditions of employment
of Executive Directors, as well as the Chairperson. The Directors’
remuneration policy was amended and approved by shareholders
at the 2021 AGM. The details of the Directors’ remuneration policy
and all Directors’ remuneration are detailed in the report on
remuneration on pages 118 to 143.
Performance outcomes in 2021
No adjustments were made to performance conditions set at the
beginning of the year to account for the impact of COVID-19 on
the operations and the formulaic GDIP outcome for the business
scorecard was 26.8% of the maximum of 85%. The Remuneration
Committee believes that the formulaic vesting outcome is a fair
reflection of the Group’s underlying performance and therefore
no discretionary adjustment was applied.
Based on the performance to 31 December 2021, 60.1% of the
long-term incentive share awards made under the 2019 ESOP will
vest in March 2022, subject to continued employment at that time.
The GDIP business scorecard is shown on page 136 and the ESOP
award calculation on page 138.
Incentive Plan
Strategic targets
The 2021 Gem Diamonds
(GDIP) rewards
performance 15% on personal factors and 85% on business
performance. This 85% business weighting aligns with the
strategic focus areas Preparing for our Future (10% weighting),
Extracting Maximum Value (55%) and Working Responsibly and
Maintaining Our Social Licence (20%). More information on the
GDIP scorecard is available on page 136.
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NOMINATIONS COMMITTEE
NOMINATIONS COMMITTEE CONTINUED
The role of the Committee is to:
•
•
•
•
•
ensure a formal, rigorous and transparent procedure for the appointment of new Directors to
the Board.
lead the process for Board appointments and make recommendations to the Board.
assist the Board in ensuring its composition is regularly reviewed and refreshed, considering
the length of service of the Board as a whole, so it is effective and able to operate in the best
interests of shareholders.
ensure plans are in place for orderly succession to positions on the Board and the
Executive Committee.
oversee the development of a diverse pipeline for succession.
Harry Kenyon-Slaney
• work and liaise with other Board Committees as appropriate, including the Remuneration
Non-Executive Chairperson
Committee in respect of any remuneration package to be offered to any new appointment
of the Board.
Membership as at 31 December 2021:
• H Kenyon-Slaney
• M Brown
• M Lynch-Bell
Other attendees:
• C Elphick
•
Secretary (Bruce Wallace Associates)
Nomination Committee skills (%)
Senior executive
International markets
Core industry
Financial/Audit and Risk
Health and safety
Environmental/Social
Technical/Engineering
M&A/Capital markets
Legal/Regulatory
44%
100%
100%
89%
78%
78%
67%
67%
67%
The Nominations Committee comprises three non-Executive
Directors and one Executive Director. The Committee’s terms of
reference provides for a formal and transparent procedure for the
Committee to follow in executing its responsibilities. The terms
of reference of the Nominations Committee is reviewed annually,
and subsequently reviewed and approved by the Board to ensure
it continues to be fit for purpose and in line with best practice and
governance principles. The last review was performed in June
2021 to ensure it was compliant with the new Code.
In order to meet UK corporate governance independence
expectations and to specifically address comments from voting
institutions around Board independence, Johnny Velloza stepped
down from the Board on 1 May 2021 and assumed an important
technical consulting role in the Company. Following Johnny
Velloza stepping down, Rosalind Kainyah MBE joined the Board
on 1 May 2021.
The change in Board composition initiated a review of the
Committee membership to ensure the relevant skills and
experience of the Board are appropriately positioned. Rosalind
Kainyah was appointed to the Remuneration, Audit and
Sustainability Committees and Mike Brown stepped down from
the Remuneration Committee. The Committee continued to
assess the Board’s composition, evaluate the composition of the
various Committees and monitor developments in corporate
governance to ensure the Group remains at the forefront of good
governance practices.
The Committee initiated an internal board evaluation in October
2021 and the outcomes will be discussed at the March 2022
Board meeting. A summary of the evaluation approach and
recommendations can be found on page 103.
2021 value-adding activities
Board composition
Link to strategic pillar
The composition, skills and independence of the Board remained key topics for the Committee during the
year. The objective of the Committee is to ensure that the Board retains a balanced composition and that
all members have the necessary skills and experience to contribute actively to the ongoing success of the
business.
In line with the UK Corporate Governance Code, the Committee assessed the independence of all non-
Executive Directors. This involved a review of both the external appointments held by each Director and
of any potential or actual conflicts of interests recorded. The Committee noted the external appointments
held by Board members which were considered to be in accordance with the parameters of the Code and
to not affect their current duties to the Board. One non-Executive Director, Mazvi Maharasoa, is not deemed
‘independent’ in accordance with the Code. However, as with other non-Executive Directors, her extensive
experience of the mining industry, and particularly the regional context within which the Group operates, is
regarded as being hugely valuable. All non-Executive Directors provide constructive challenge and robust
scrutiny of matters that come before the Board and, after careful consideration, the Committee and the
Board were satisfied that Mazvi Maharasoa demonstrates the qualities of independence in carrying out her
duties. All Board members were recommended for re-election and election at the 2021 AGM.
The Committee oversaw the appointment of Rosalind Kainyah, following a rigorous recruitment process
through an independent search consultant, Jack Hammer Executive Search. Jack Hammer Executive Search
was engaged as it has a global reach of more than 50 countries and over several industries and has a track
record for successful placements of non-Executive Directors. Jack Hammer Executive Search had no other
connection to the Company or its Directors during the year.
In November 2021 the Committee approved a Board Selection and Appointments policy, thereby ensuring
that appointments to the Board are made in a way which will promote the success and strategic direction
of the Group.
Succession planning
The Committee maintains a proactive approach to succession planning and regularly reviews succession
planning across the organisation through a succession framework. This ensures candidates have been
identified to fill key roles in both planned and emergency situations and that appropriate development
plans are in place. The competencies and experience required in the boardroom were regularly assessed as
part of the succession planning process and the Committee will continue to review the need to secure any
particular or specific skills.
The Committee further extended its succession planning review from senior management to the next
level of management, considering emerging talent and key roles with a particular focus on maintaining
momentum on diversity. Development plans for potential successors will be progressed during the year.
Diversity
There remains a commitment to diversity in the boardroom just as the Company is committed to equal
opportunities at all levels within the organisation. The Committee continued to be supportive of this
objective during the year and focused appointments and succession planning on ensuring gender and
ethnic diversity as well as ensuring that a wide range of experience, backgrounds, perspectives and skills
were available to facilitate effective decision-making.
In line with its commitment, the diversity of the Board was enhanced through the appointment of Rosalind
Kainyah. Further to this there was an improvement in the diversity of the leadership pipeline through the
appointment of women to senior management and management positions. Further detail on the Group's
diversity and inclusion approach can be found on page 103.
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NOMINATIONS COMMITTEE CONTINUED
SUSTAINABILITY COMMITTEE
2021 value-adding activities
Board effectiveness
Link to strategic pillar
The Committee considered the 2020
internal Board evaluation outcomes and addressed the
recommendations along with some of the key findings, such as the implementation of a formal Board
Selection and Appointments policy and the appointment of Rosalind Kainyah to satisfy the Board’s
independence requirement. In addition, it oversaw the 2021 internal Board evaluation, which covered Board,
Committee and individual Director performance. The details are discussed on page 103.
The findings from the internal evaluation were discussed in March 2022 and reported to the Board. The
Committee will monitor progress on the implementation of the recommendations during the coming year.
An annual reassessment of the Board skills matrix serves to provide assurance that the measured skills remain
fit for purpose and supports the Group strategy. In March 2021 the Committee approved an amended skills
matrix. The new skills matrix comprises four core skills and five sector specific skills which is aligned with the
Glass Lewis descriptions of the criteria used to appraise Director skills.
Committee membership
The Committee and the Board remain committed to complying with the provisions of the Code. Following
the appointment of Rosalind Kainyah the Committee recommended changes to the Audit, Remuneration
and Sustainability Committees’ membership during the year, in order to enable the newly appointed non-
Executive Director to be included on those Committees where other members would benefit from her
knowledge and expertise, particularly as it relates to sustainability and ESG matters. All Board Committees
are compliant with the provisions of the Code.
Mike Brown
Non-Executive Director
The role of the Committee is to oversee, on behalf of the Board, the Group policies pertaining to
sustainability matters and to assist the Board in fulfilling its governance and oversight responsibilities
in order to:
•
promote a culture of zero harm and responsible care through effective risk management that
prioritises the workforce, creating a safe and healthy environment.
• minimise environmental impact and improve resource use efficiencies.
•
promote corporate social responsibility with a lasting positive impact in PACs and host
countries.
achieve the goal of sustainable development, meeting the needs of the present while
sustaining the ability of future generations to support their needs.
review and monitor the Group’s approach, policies and measures on sustainability matters.
•
•
Membership as at 31 December 2021:
• M Brown
•
R Kainyah
• M Maharasoa
• H Kenyon-Slaney
Other attendees
•
B de Bruin
• G Turner
• HSSE and Sustainability Manager
•
Secretary (Bruce Wallace Associates)
Future focus areas
Sustainability Committee skills (%)
The Committee will maintain its focus on ensuring the Board’s composition is strong and diverse, providing
support and advice to enable management to steer the Group in an increasingly volatile and fast-paced
environment, while always promoting exemplary governance practices in the boardroom.
The Committee will continue to monitor alignment of talent and succession planning throughout the
organisation to the needs of the business and to the Group’s long-term strategy. Development plans for
potential successors will continue to be progressed during the coming year.
The Committee will review the ESG competence and skills of the Board and whether succession plans
explicitly address ESG competency.
The Committee will review continued legislative and regulatory action on board composition and diversity
targets set by the FCA.
The Committee will conduct an external Board evaluation and continue to hone Board skills, experience
and operational effectiveness to ensure a high level of performance in Board activities in the best interests
of all stakeholders.
Extracting maximum value
from our operations
Working responsibly and
maintaining our social licence
Preparing for our future
Senior executive
Core industry
Environmental/Social
Legal/Regulatory
Health and safety
International markets
Technical/Engineering
Financial/Audit and Risk
100%
83%
75%
67%
67%
67%
58%
50%
M&A/Capital markets
42%
Included in the responsibility of the Committee are the following
sustainability matters:
Safety – achieving a culture of zero harm in the Group
Health and wellbeing – occupational hygiene, community
health matters and the health and wellbeing of the workforce.
Environment – protection of the environment, natural resource
stewardship, mine rehabilitation and closure.
Climate change – financial impact, risks and opportunities
related to climate change, operational mitigation and adaptation
measures.
Corporate social responsibility – relationships with PACs, socio-
economic development projects, community development,
human rights and the UN SDGs.
Socio-economic issues – including such issues as contributions
to national socio-economic development, licencing, long-term
economic development, land access and corporate governance.
Supply chain – specifically local and inclusive procurement,
supplier assurance and the impact of procurement decisions on
health and the environment.
Mike Brown visited Letšeng on three occasions during the year.
Johnny Velloza visited Letšeng in February. These visits specifically
focused on:
•
•
•
Safety culture and performance.
Tailings management.
Risk management with regards to heavy machinery and
equipment and pit safety.
• CSI projects.
•
Bioremediation and water management.
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SUSTAINABILITY COMMITTEE CONTINUED
SUSTAINABILITY COMMITTEE CONTINUED
SUSTAINABILITY COMMITTEE CONTINUED
2021 value-adding activities
Working towards a culture of zero harm
The Committee continued to monitor critical health and safety matters during 2021, including:
• Management of the COVID-19 impacts and vaccination roll-out;
•
Tailings and water storage facilities management; and
• Organisational safety culture drive.
The Committee received quarterly reports on health and safety performance throughout the Group with
particular focus on the COVID-19 management strategy and the vaccination programme. The Committee
received feedback on the impact of COVID-19 on production activities and the measures the Group
implemented to protect its workforce, operate responsibly and build resilience through vaccination.
The Committee received regular reports on safety performance trends, including LTIs and near-misses.
In response to concerning trends, the Committee approved appropriate mitigation strategies such as
establishing a council of safety and mining experts to review safety reports and advise on appropriate
controls, commissioning a safety culture perception survey to assess the maturity of safe behaviour within
the organisation and partnering with external safety consultants to mature the safety framework and
culture at Letšeng, and to provide coaching on effective safety leadership. The Committee also received
incident investigation reports on significant safety incidents and approved several immediate and long-
term interventions to address the root causes of the incidents, such as implementing a Critical Control
Management Strategy.
The Committee received feedback on the progress made to assess conformance with the ICMM GISTM and
measures implemented to align existing practices with those outlined in the standard. There were regular
reports on the tailings and water storage facilities at Letšeng, and these reports provided assurance that
the facilities were functional and were being effectively monitored and managed in a safe and responsible
manner.
The Committee received feedback on independent audits conducted to provide assurance on safe and
responsible business practices and to identify opportunities for improvement of the health and safety
management system. These audits included:
•
•
•
Legal compliance.
ISO 45001 occupational health and safety management.
Tailings storage and fresh water facilities.
• Health and safety systems management.
Link to strategic pillar
2021 value-adding activities
Link to strategic pillar
Promoting corporate social responsibility
Corporate social responsibility matters remain a priority and following COVID-19-related delays in 2020 the
Committee focused on the below matters during 2021:
• Completion of an updated community needs analysis.
• Development of a UN SDG-aligned five-year CSI strategy.
•
Emergency flood response and infrastructure restoration.
• Medical and health service assistance.
•
Implementation of the planned 2021 CSI programme.
The Committee is pleased to report no major or significant stakeholder incidents were recorded during the
year. The Committee continued to monitor the impact of the global COVID-19 pandemic on its PACs and
received reports on the progress made in delivering the 2021 CSI strategy. The strategy included projects
delayed in 2020 as a result of COVID-19 restrictions, basic infrastructure provision and continued COVID-19
aid to communities, including the donation of 20 000 vaccinations and an ambulance.
The Committee received feedback following the 2021 community needs analysis, reviewed the updated
CSI strategy and approved the integration of the Group’s six priority UN SDGs into the five-year investment
strategy. The Committee oversaw the voluntary submissions of the Group’s tailings management processes in
line with the Group's adoption of the ICMM GISTM to promote fair and transparent stakeholder engagement
and relations.
Minimising environmental impact
The Committee is pleased to report that no major or significant environmental incidents were recorded
during 2021. The Committee continues to monitor the environmental impact of the Group's operations and
oversees the various strategies aimed at mitigating this impact. During 2021 the Committee focused on the
following environmental matters:
•
Efficient water management and stewardship.
• Advancing the Bioremediation project.
•
•
Enhancing the concurrent rehabilitation strategy.
Biodiversity conservation.
• Compliance with adopted best practice standards.
The Committee received reports on waste and water management throughout the Group, and oversaw
the completion of rehabilitation efforts on the old TSF at Letšeng. The Committee received feedback on
the 2021 rehabilitation strategy review and approved the Letšeng concurrent rehabilitation plan. The
Committee oversaw the continuing successful implementation of the nitrate management plan at Letšeng,
which included projects such as leachate testing and the Bioremediation pilot plant.
The Committee also received external non-financial audit reports on the management of environmental
parameters and the resulting impact on the environment to benchmark the Group's performance and
identify improvement opportunities. These reports included:
•
•
•
The Group Carbon and Water Footprints.
ISO 14001 Environmental systems audit.
The SEMP compliance audit report.
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SUSTAINABILITY COMMITTEE CONTINUED
2021 value-adding activities
Sustainability Strategy and Reporting
Link to strategic pillar
The Committee received reports on the advancement of sustainability-focused projects within the Group
and approved updates to Group processes as appropriate. The Sustainability projects included:
• Adopting the recommendations of the TCFD and developing an appropriate climate change strategy.
•
Integrating the Group’s six priority UN SDGs into business strategy.
• Updating the stakeholder impact materiality assessment.
• Developing the sustainability communication strategy.
•
Integrating new best practice standards into the Group sustainability audit protocol.
Future focus areas
The Committee’s core focus areas for 2022 include:
• Maturing of organisational safety culture and safety focused leadership coaching.
• Commence construction of the full-scale bioremediation project.
•
Improving resource use efficiency and reducing non-mineral waste.
• COVID-19 operational resilience and vaccination programme.
• Delivery of corporate sustainability KPIs.
•
•
Implementation of the Group’s UN SDG framework.
Implementation of the five-year CSI Strategy.
• Advancement of the Group climate change strategy and TCFD adoption.
• Continued implementation of global best practice standards.
AUDIT COMMITTEE
The role of the Committee is to assist the Board in fulfilling its oversight responsibilities by reviewing
and monitoring:
•
•
•
•
The integrity of the financial and narrative statements and other financial information, including
climate-related financial disclosures, provided to shareholders.
The Group’s system of internal controls and risk management.
The internal and external audit process and auditors.
The processes for compliance with laws, regulations and ethical codes of practice.
Membership as at 31 December 2021:
Michael Lynch-Bell
Chairperson
Non-Executive Director
• M Lynch-Bell
• M Brown
•
R Kainyah
Other attendees:
• H Kenyon-Slaney
• C Elphick
• M Maharasoa
• M Michael
•
B de Bruin
• Group Financial Controller
• HSSE and Sustainability Manager
•
•
External and internal audit
Secretary (Bruce Wallace Associates)
Extracting maximum value
from our operations
Working responsibly and
maintaining our social licence
Preparing for our future
Audit Committee skills (%)
Senior executive
International markets
Environmental/Social
Core industry
Legal/Regulatory
Health and safety
Financial/Audit and Risk
Technical/Engineering
M&A/Capital markets
100%
78%
78%
78%
67%
67%
67%
56%
56%
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AUDIT COMMITTEE CONTINUED
AUDIT COMMITTEE CONTINUED
2021 value-adding activities
External auditor and audit effectiveness
Link to strategic pillar
2021 value-adding activities
Anti-bribery and corruption
Link to strategic pillar
During the year, the Committee fully considered the effectiveness, objectivity, skills, capacity and
independence of EY SA, considering all current ethical guidelines, and was satisfied that all criteria were met.
The auditor’s fee was approved as part of this process.
In advance of the 2021 audit, the Committee reviewed and assessed the appropriateness of the external
auditor’s plan, audit strategy, scoping, materiality and audit risks. The significant areas of audit focus
identified by the external auditors to be addressed during the course of the audit which were in line with
the previous year, were primarily: revenue recognition, impairment of property, plant and equipment
and goodwill, the continued treatment of Ghaghoo as a discontinued operation and the application of
IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, COVID-19-related matters, deferred
waste stripping calculation, taxation, rehabilitation provisions, bank facility renewals and share-based
payments. Additional areas of audit focus in the current year related to the diesel theft at Letšeng which
was identified through the Letšeng whistleblowing facility during the year, and the cyber breach which
occurred subsequent to year end. The key audit matter during the year was the goodwill impairment
as mentioned in the Independent Auditor’s Report on page 149. The Committee was satisfied that all
material audit risks were covered within the auditor’s scope. The Committee assessed the materiality level
applied as appropriate to identify relevant audit risks.
Following the audit, EY SA presented its findings to the Committee and met separately with the Committee
Chairperson to discuss key audit findings, judgements and estimates. This provided an opportunity to assess
the audit work performed, understand how management’s assessments had been challenged and assess
the quality of conclusions drawn. The Committee also made enquiries of senior management to obtain its
feedback on the audit process and considered this feedback in its assessment.
In line with the Code and the duty of the Committee to assess the effectiveness of the audit process, a
detailed assessment by way of a survey was again carried out during the year focusing on the 2020 audit.
This survey enabled the Committee to assess the extent to which the audit strategy was appropriate for
the Group’s activities and addressed the risks the business faced, including factors such as: independence,
materiality, the auditor’s risk assessment versus the Committee’s own risk assessment and the extent of the
Group auditor’s participation in the subsidiary component audits. The responses formed the Committee’s
assessment of the effectiveness of the audit, citing minor areas of improvement around the efficiency of
the audit process and collaboration of all audit specialist teams involved. The Committee commended the
auditor’s conclusion of the audit, considering the COVID-19 backdrop of remote working conditions and
constrained capacity of audit team members.
Auditor appointment and independence
The Committee remains satisfied with the performance of EY SA and recommended its reappointment to
the Board. The lead engagement partner has served three of his five consecutive years. Other senior primary
audit employees will serve no longer than seven consecutive years with a two-year cooling-off period.
The Committee assessed the tenure of the partners and senior employees as adequate, considering the
transition to EY SA in early 2019.
The provision of any non-audit service requires Committee pre-approval if above a certain level and
is subject to careful consideration, focused on the extent to which provision of such non-audit services
may impact the independence or perceived independence of the auditor. EY was engaged to assist with a
forensic investigation to be performed at Letšeng following allegations of theft of diesel used in the mining
operation raised through the whistleblowing facilities. The Committee noted that these services are not
permissible services in terms of the FRC requirements (the Group aims to comply with these requirements),
but considered the value as immaterial and this investigation as being the most effective way to attend to
this incident. The Committee received regular reports on any proposed non-audit work to be undertaken by
EY and monitored the fees in line with the delegation of authority framework. All such fees during the year
were below the Committee’s thresholds for approval. Through monitoring these activities, the Committee
ensured it safeguarded auditor objectivity and independence. The fees for such work amounted to US$41
283. This was against the external audit fee of US$427 511, representing 9.7% of external audit fees.
The policy which was approved in 2020 remained in effect during the year, with there being no incidents of
bribery during the year. The Committee is satisfied that the policy remains robust regarding compliance and
diligence procedures and will be reviewing an updated policy in 2022.
Acting on whistleblowing
The Committee reviewed and monitored the actions and progress of all the whistleblowing reports that
arose. The whistleblowing line is an important tool to promote and encourage transparency and identify
potential areas of irregularities within the Group. During the year, 25 reports (16 relating to contractors)
were received through the whistleblowing line, of which 23 were closed before the end of the year and two
remained under investigation. The majority of the reports related to labour practices and remuneration
matters. The most significant whistleblowing report received related to allegations of theft of diesel
used in the mining operation. Management immediately commenced an internal investigation which
confirmed the allegations, suspended the suspects involved and implemented additional procedures to
mitigate any further loss. EY Forensics were engaged to do an investigation which identified collusion and
weakness in internal controls that resulted in the override of controls. The matter was referred to the local
police and the Group’s insurers. The Committee found the investigation process remained transparent
and actions taken in response to these reports to be swift and appropriate.
The Committee approved the Group’s Fraud and Whistleblowing policy which remained unchanged from
the previous year’s review.
Monitoring internal audit
The principal matters reported by the Group Internal Auditor, based on its strategic and risk-based audit
plan, were reviewed by the Committee and it continued to monitor management’s responsiveness to the
findings and recommendations from the Internal Auditor. Risk management effectiveness, health, safety and
environmental, asset management and procurement were focus areas for Group Internal Audit during the
year. The 2022 Internal Audit plan was approved by the Committee and is linked to the current risk profile
of the organisation.
There was no change to the Internal Audit Charter which was approved in June 2020.
The Committee assessed the effectiveness of Group Internal Audit during the year by conducting a survey
which included:
•
•
•
a self-assessment of the Committee on its responsibility for the effectiveness of the Group Internal
Audit function in the context of the Group’s overall risk management system;
an assessment by the Committee of the Internal Audit function focusing on Group Internal Audit’s
understanding of the Group, integrity and objectivity, independence, structure, resources, planning,
governance, reporting and relationships within the Group; and
an assessment by the Group management structure of the Internal Audit function focusing on
Group Internal Audit’s planning, execution of work, reporting, integrity, objectivity, independence,
competence and due professional care.
The responses formed the Committee’s assessment of the effectiveness of the Group Internal Audit which
was found to be effective. The Committee also considered if additional resources were required to extend
the internal audit function but concluded that the current structure was appropriate for the size and
requirements of the Group.
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AUDIT COMMITTEE CONTINUED
AUDIT COMMITTEE CONTINUED
2021 value-adding activities
Risk management and internal controls
Although the Committee maintained its oversight on the principal and emerging risks during the year, in line
with the Code’s requirements for all Board members to focus on risk management, the separate quarterly
Risk Meetings continue to be held as an extension of the main Board meeting with all Board members
attending. The main risk areas that the Board concentrated on and considered were:
•
•
•
•
•
climate change;
the residual impact of COVID-19 throughout the business model;
the tax uncertainty relating to the amended assessment by the Lesotho Revenue Authority;
dam wall safety; and
the challenging insurance market.
The detailed principal and emerging risks are discussed further pages 37 to 44.
As a result of the challenging insurance market, the risk appetite was reconsidered and a programme to self-
insure a portion of the risk was implemented through the 2021 insurance renewal process.
The Committee assessed the appropriateness of the cover and the ability to transfer any potential financial
implications of the risks materialising. Based on the revised insurance strategy, the Committee reviewed the
revised enterprise risk management framework.
The Committee considered the internal controls in place throughout the year as being effective. Further to
the forensic investigation on the diesel theft, the Committee considered the internal controls in place and
what additional procedures were implemented to ensure the potential for a similar breach was mitigated.
Information Technology (IT)
Following a Malware breach on the Letšeng IT systems in February 2022, the Committee considered the
security protocols and the process undertaken to restore IT systems. The Committee further considered the
impact on the operations, the timing and efficiency to restore normal IT functionality, the effectiveness of
the Business Continuity Plan and concluded that the impact of any data extracted was not significant and
did not result in any reporting obligations.
The Committee was satisfied that back-up data was successfully restored with only a few days of lost data
which has been recaptured in all material respects, and that there was no material impact on operating
activities.
Annual review
During the year the Committee updated its terms of reference to ensure these encompassed the updated
provisions from the Code. The Board evaluation undertaken included a review of the Audit Committee’s
performance within its remit.
Climate-related financial disclosures
Following the Group’s adoption of the TCFD recommendations in June, the Audit Committee regularly
received reports on risk, strategy and governance processes related to climate change and the associated
financial disclosures. The Audit Committee had oversight of climate-related risks and potential financial,
strategy and business planning impacts, through presentations to the Board during separate quarterly Risk
Meetings. During 2021, the Audit Committee received feedback on:
•
•
•
•
•
progress regarding the Group TCFD Adoption strategy;
the Board and Management Governance structures established related to climate change;
identifying and assessing climate-related risks;
the Group's readiness for climate-related financial disclosure reporting; and
assurance, through the Sustainability Committee, on climate-related risk management effectiveness.
Link to strategic pillar
2021 value-adding activities
Link to strategic pillar
Financial disclosure
The Committee continued to ensure that the Group’s Annual Report and Accounts 2021 and the Half-Year
Report 2021 were fair, balanced and understandable by challenging and debating the judgements made by
management and ensuring the information necessary for shareholders to assess the Group’s performance,
business model and strategy is provided. EY SA audited the Financial Statements included from pages 147 to
211 for the year ended 31 December 2021 and issued an unmodified audit opinion in this regard.
The significant issues reviewed by the Committee relating to the 2021 results were:
•
•
•
•
The assumptions in the Group’s financial forecasts incorporating the successful roll over of the Group’s
debt facilities and the status of forecast future covenant compliance, mitigating actions available to the
Group, and the appropriateness of the going concern and viability assumptions and related disclosures.
The Committee assessed the disclosures in the Annual Report and Financial Statements in respect of
going concern and covenant compliance and concluded that they were appropriate. Refer to Note 1.2.2,
Going concern on page 162 for further details.
The significant estimates and judgements applied in the valuation of the carrying value of mining assets,
intangible assets and impairment testing, considering the impact of COVID-19 on pricing, production
capabilities and exchange rate fluctuations. The Committee critically reviewed the key assumptions and
parameters (diamond price forecasts, foreign exchange rates against current rates and the discount rates
applied in assessing the valuations) in the LoM plan for Letšeng that supported the impairment tests
performed by management, together with the sensitivity analysis performed under various scenarios.
The Committee noted the diamond price recovery in the LoM plan given the recovery of the diamond
market experienced in the year. Changes to the underlying operational plan, costs and capital expenditure
assumptions did not materially change the LoM valuation. There was no impairment charge necessary
and Letšeng’s carrying value remained above its recoverable value. The Committee further reviewed the
relevant disclosure in the Financial Statements to ensure compliance with reporting standards.
The judgements applied by management in the continued assessment of Ghaghoo as a discontinued
operation, 30 months since its initial assessment, and the application of IFRS 5 Non-current Assets
Held for Sale and Discontinued Operations to its results. The Committee assessed the delays caused
in the conclusion of the sales process and supported management assumptions on the basis that the
Company remains fully committed to the sale.
The assumptions relating to the classification of tax uncertainties and the treatment and disclosure
thereof in relation to the amended tax assessment issued to Letšeng by the LRA in December 2019,
contradicting the application of certain tax treatments in the current Income Tax Act.
Future focus areas
Specific focus areas for 2022 are to:
• monitor the implementation of the revised enterprise risk management framework;
•
•
•
continue to assess principal and emerging risks and consider the impact of climate change on any of these risks;
continue to assess the quality and effectiveness of the external audit and the procedures and controls
to ensure auditor independence; and
ensure continued adequate reporting against relevant sustainability standards such as the TCFD
recommendations and UN SDGs.
Extracting maximum value
from our operations
Working responsibly and
maintaining our social licence
Preparing for our future
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REMUNERATION COMMITTEE
REMUNERATION COMMITTEE CONTINUED
The Committee believes that the remuneration policy is
appropriate to motivate and reward senior Executives
and align their interests with the Group’s purpose and
values as well as the interests of the shareholders.
STRUCTURE
Annual statement, which includes an ‘at a glance’ of
remuneration decisions
2021 Remuneration Policy
Annual report on remuneration
FOCUS AREAS 2021
• Adoption of the 2021 remuneration policy to ensure robust
and motivational incentives.
•
•
•
•
Employee remuneration and related policies and the
alignment of incentives and rewards with culture and
strategy.
The link of appropriate ESG measures to executive pay.
Performance conditions and targets for incentive plans given
the impact of COVID-19 and the focus on stabilisation and
business recovery.
The composition of the total reward package for the Group
and any constituent parts which could have discouraged the
promotion of individuals from minority groups.
•
Implementation of a post-termination shareholding policy.
• Gender pay data to establish whether pay gaps are present.
•
•
The most effective way to engage with employees on how
executive pay aligns with the Group’s strategy and the wider
employee group.
Re-evaluate alignment of executive pension contributions to
that of the wider employee group.
Page 119
Page 122
Page 129
Michael Lynch-Bell
Chairperson
Non-Executive Director
FUTURE FOCUS AREAS 2022
• Understand how the Group’s compensation programmes
consider employees’ needs beyond fair and equitable
remuneration.
•
Review the effectiveness of current ESG metrics linked to
executive pay and consider whether further Human Capital
Management (HCM) topics are material to the business and
should be monitored.
• Given the changing responsibilities of the Committee,
review its composition, terms of reference and operation.
• Consider whether Diversity, Equity and Inclusion (DE&I)
metrics should be linked to executive pay.
•
Engagement with employees through formalised structures
on executive pay and how it supports strategy.
ANNUAL STATEMENT
Dear shareholders
On behalf of the Board, I am pleased to present the Remuneration
Committee’s Directors’ Remuneration Report for 2021. The
report is presented in three sections: this Annual statement, the
Directors’ Remuneration Policy (page 122) and the Annual Report
on Remuneration (page 129).
Linking Executive Directors’
remuneration with our purpose and
strategy
Executive remuneration is focused on the underlying health and
performance of the Group and considers key drivers, including
relevant ESG factors. Performance metrics consist of both
financial and non-financial KPIs linked to our strategy, which in
turn support the Group’s purpose to unearth unique possibilities.
These unique possibilities are relevant for our employees, the
communities in which we operate and shareholders alike. Each
strategic pillar is linked to an element of remuneration as set out
on pages 122 to 128 of the Directors’ Remuneration Policy.
Remuneration decisions taken during
2021
2021 marked the end of the four-year BT programme launched
in excess of the targeted US$100
in 2017. We delivered
million in revenue, productivity and cost savings by achieving
US$110.0 million. During 2021, the Group faced numerous
waves of the COVID-19 pandemic. Rapid roll-out of testing,
establishment of the analysis laboratory on site in 2020, the
stringent continuation of protocols and use of these facilities
enabled uninterrupted operations. In conjunction with the British
Government, the Group donated 20 000 vaccines to the Lesotho
Government. This project fast-tracked the successful roll-out of
vaccinations covering 99% of the workforce at the mine to date.
Across the Group there were no salary cuts during 2021 as a
result of the impact of COVID-19, no employees were furloughed,
and no government assistance was taken up.
Despite the challenges of 2021, the Group ended the year with
a cash balance of US$31.1 million and drawn-down facilities of
US$10.2 million, resulting in a net cash position of US$20.9 million.
Underlying EBITDA from continuing operations increased 8% to
US$57.4 million from US$53.2 million in 2020. A cash dividend
of 2.5 US cents was paid during the year. In light of the positive
financial results in 2021, the Board is again proposing a dividend
of 2.7 US cents per share, as part of sustaining its capital returns
policy.
With the results and cash flows generated by the Group, the
Group’s share performance has been positive. The Group achieved
a c.18.7% absolute total shareholder return for 2021 and was at
the top of its peer group over the three-year period ended 2021.
During the year the Group commenced a preliminary conceptual
study on the potential economic viability and mining method for
underground expansion of the Satellite pipe at Letšeng (with the
potential to include the Main pipe in the future).
The Group also successfully concluded its CCSA to identify and
assess its physical climate change risks as part of the adoption of
the TCFD recommendations.
In this context, the Committee’s key decisions during the year
related to the following areas:
GEM DIAMONDS INCENTIVE PLAN (GDIP)
As in the previous incentive plan (STIBS), the GDIP was based
on a range of financial, operational and personal objectives
that support the delivery of the Group’s key strategic priorities,
with 85% linked to business performance and 15% to personal
performance.
The resulting formulaic GDIP outcome for the business scorecard
was 26.8% of maximum (which accounted for 85% of the GDIP);
the personal performance outcomes (accounting for 15% of
the GDIP) averaged 13% across the Executive Directors. The
Committee considered whether the GDIP outcome accurately
reflects the underlying performance of the business and the wider
employee and shareholder experience, and was satisfied that it
does. The Committee exercised no discretion in determining the
outcome of the GDIP.
ESOP
The 2019 ESOP rewards performance against total shareholder
return against a tailored diamond mining peer comparator
group (25% weighting), delivery of the BT programme (25%),
and profit and production (50%), all measured over a three-year
performance period.
The Company’s three-year TSR over the period was at the top
of the peer comparator group, which resulted in 100% of the
element vesting. 25% (out of a maximum of 25%) and 20.24%
(out of a maximum of 50%) of the BT and profit and production
elements will respectively vest, based on performance over the
three-year period. Overall, 60.1% of the share awards granted
to the Executive Directors under the 2019 ESOP will vest on
20 March 2022, subject to continued employment at that time.
The specific targets and outturns underlying these elements
are discussed in detail on page 139 of the Annual Report
on Remuneration. The Committee believes the formulaic
vesting outcome is a fair reflection of the Group’s underlying
performance and
therefore no discretionary adjustment
was applied.
We have not included a CEO pay ratio in this report, as the
Company has only one employee based in the UK, and any
resulting ratios would not be meaningful.
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121
REMUNERATION COMMITTEE CONTINUED
REMUNERATION COMMITTEE CONTINUED
Implementation of the remuneration
policy in 2022
The Executive Directors’ salaries were reviewed in February 2022,
considering relevant benchmarks and in-country inflation. The
review is in line with the general practice of considering the wider
employee group when applying inflation as a base for salary
increases across the Group. Based on all considerations, including
current market conditions, the Remuneration Committee
determined that base salaries would be increased by 4%.
For 2022, the GDIP will remain unchanged with a maximum annual
award opportunity of 180% of salary. Group performance will
continue to be measured with reference to a business scorecard
linked to the Group’s three strategic focus areas: Extracting
Maximum Value from Our Operations; Working Responsibly and
Maintaining Our Social Licence; and Preparing for Our Future.
Group performance will be weighted 85% of maximum, with the
remaining 15% linked to personal performance.
The incentive will be paid 55% in cash and 45% will be awarded
through the issue of nil-cost options vesting in one-third annual
tranches after one, two and three years, subject to continued
employment and good/bad leaver provisions over this period.
Vested awards will also be subject to a two-year post-vesting
holding period, during which time Executive Directors may not
sell shares except to cover taxes associated with the exercising
of share options. Malus and clawback provisions will apply
during the performance period and for a period of two years
following payment.
The Committee has reconsidered the timing over which the
Executive Director pensions will align with that of the wider
employee group, taking into account market practice and
guidance from investors, and concluded that the alignment
should be brought forward to 1 January 2023. As a result, the
Executive Director pensions will reduce with 1.1% and 0.9%
of salary for the CEO and CFO respectively on 1 April 2022 (as
originally planned), with a further reduction of 4.7% for the CEO
and 3.7% for the CFO taking effect on 1 January 2023, to be fully
aligned with workforce pensions at that time.
At the February 2022 meeting, the Committee also considered
the level of share ownership required under the shareholding
guidelines and concluded that this should be raised from 100%
to 200% of salary for the Executive Directors.
Refer to pages 140 to 141 for further details on the implementation
of the 2022 remuneration policy.
Engagement
I look forward to receiving your support at our 2022 AGM.
The Board considers it important that shareholders have
the opportunity to raise questions with the Board. As
such, shareholders are invited to send any questions that
they may have on this report or in relation to any of the
Committee activities. Please feel free to contact me through
Minelle Zech, the Group Human Resources Manager on
mzech@gemdiamonds.com.
Michael Lynch-Bell
Chairperson of the Remuneration Committee
16 March 2022
REMUNERATION AT A GLANCE
Fostering a culture of transparent and fair remuneration which supports our
purpose and strategy and is aligned with wider employee considerations
BASIS OF PREPARATION
This report has been prepared in accordance with the principles of the UK Companies Act 2006, Schedule 8 of The Large and Medium-
sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013 and the UK Market Abuse Regulations. The external
auditor of Gem Diamonds has audited information within this remuneration report which has been marked as such.
COMPONENT
BASIC SALARY
• Market-competitive base salary to
recruit and retain individuals.
• No prescribed minimum or maximum
annual increase.
BENEFITS
• Cash allowance in lieu of non-cash
benefits.
PENSION
•
Retirement benefits that are
appropriately competitive.
• Alignment with wider employee
group by January 2023.
GDIP
•
Participants can receive a maximum of up to 180% of their base salary.
•
For threshold- and target-level performance, the incentive earned is up to 20% and 50% of maximum opportunity, respectively.
• Group scorecard targets may include one or more of the three key strategic priority areas.
• Award to be delivered 55% in cash and 45% in nil-cost share options vesting in one-third annual tranches after one, two and three
years, and subject to a two-year post-vest holding period.
100% REMUNERATION COMMITTEE ATTENDANCE
NO MALUS OR CLAWBACK
PROVISIONS TRIGGERED IN 2021
WIDER CONSIDERATIONS FOR EMPLOYEES IN 2021
+5.2% Approved inflationary increase to comparative
employees’ basic salaries effective from 1 January 2021
(excluding Directors)
7.5% Executive Director pension alignment
13.2%
by January 2023 (accelerated compared to that previously
adopted in the 2021 remuneration policy)
Similar performance scorecards for management incentive
schemes across the Group
BASIC SALARY AND SHAREHOLDING
GDIP
SHAREHOLDING
PROFILE OF SCORECARD
100% of salary (to be raised to 200% in 2022)
CEO
Total shareholding
784% of salary
CFO
Total shareholding
52% of salary
%
PENSION AND BENEFITS:
•
Pension contributions for the CEO and CFO reduced respectively by 1.2% and
0.9% of salary.
• No change was made to allowances for non-cash benefits.
TOTAL NON-EXECUTIVE DIRECTOR FEE
365 500 < £750 000
MAXIMUM AGGREGATE PER THE ARTICLES
Individual
Group
Extracting Maximum Value
from Our Operations
Working Responsibly and Maintaining
Our Social Licence
Preparing for Our Future
TOTAL
15%
85%
55%
20%
10%
100%
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REMUNERATION COMMITTEE CONTINUED
REMUNERATION COMMITTEE CONTINUED
REMUNERATION POLICY 2022
The Remuneration Policy was approved by the shareholders at
the AGM on 2 June 2021 and became effective from this date. The
Committee considered the relevance of the policy at its February
2022 meeting and concluded that two areas of implementation
would be toughened to reflect market practice and guidance
from investors. Pensions for the Executive Directors will now be
reduced to align with that of the wider employee group by 1
January 2023 (rather than by 2026 as under the approved Policy)
and the shareholding requirement will be increased from 100%
to 200% of salary.
The Remuneration Policy is designed to provide a level of
remuneration which attracts, retains and motivates executives of
a suitably high calibre to manage the business, implement the
Group’s strategy and maximise long-term shareholder wealth.
It is intended that, as far as possible, remuneration policies and
practices will conform to best practice in the markets in which
the Group operates, will be aligned with shareholder interests
and will promote effective management of business risk.
The Committee’s policy is to weight remuneration towards
variable pay in order to provide base salaries and benefits that
are fair, and variable pay incentives linked to the achievement of
realistic performance targets relative to the Group’s strategy and
corporate objectives.
The Committee is satisfied that the proposed policy is clear,
simple, and appropriately aligned with the Group’s strategy, risk
appetite and culture, and that the incentives are appropriately
capped.
How good governance informs policy
design
The table below sets out the application of the Principles of
the Code relating to the design of remuneration policies and
practices:
Clarity
Simplicity
Risk
Proportionality
Predictability
Culture
Targets for annual cash incentives and share awards are aligned to the Group’s strategic priorities.
This provides clarity to shareholders and other stakeholders on the relationship between the
successful delivery of the Group’s strategy and remuneration paid.
The remuneration policy is designed to be simple and clear while complying with all relevant
regulatory requirements and meeting shareholder expectations. It simplifies remuneration
elements further by combining the cash and deferred shares components into a single GDIP.
The Committee is aware of the risks that can result from excessive rewards and believes that the
robust target-setting and long history of applying discretion to formulaic outcomes reflects this.
Malus and clawback provisions in the remuneration policy further mitigate this risk.
The Committee’s overriding discretion ensures that remuneration outcomes are aligned with
Group performance.
The GDIP ensures a simpler but more predictable range of performance outcomes that align with
the business model, ensuring predictable pay outcomes that do not reward poor performance.
As reflected in the Chairperson’s statement on page 119, the Committee considers overall pay
and conditions for employees across the Group when determining Executive Director outcomes.
Personal and Group performance measures include non-financial metrics linked to the Group’s
purpose and culture.
Policy table for Executive Directors
SALARY
Purpose and link to
strategy
To offer a market-competitive base salary to recruit and retain individuals of the high calibre necessary
to execute the Company’s business strategy.
Operation
Base salaries are reviewed annually with changes effective from 1 April.
Salaries are typically set after considering the salary levels in companies of a similar size, complexity
and risk profile, the responsibilities of each individual role, progression within the role, and individual
performance.
In setting salaries for Executive Directors, the Committee takes note of the overall approach to salary
reviews for the wider employee group.
Opportunity
There is no prescribed minimum or maximum annual increase.
It is expected that salary increases for Executive Directors will ordinarily be (in percentage of salary
terms) in line with those of the wider employee group in countries of a similar inflationary environment.
In certain circumstances (for example, where there is a change in responsibility, role size or complexity,
or progression in the role), the Committee has discretion to award higher increases to ensure salary
levels remain competitive.
Performance measures
N/A
BENEFITS
Purpose and link to
strategy
Operation
Opportunity
To provide competitive benefits considering the market value of the role and benefits offered to the
wider UK management population, in line with the Company’s strategy to keep remuneration simple
and consistent.
Executive Directors receive a cash allowance in lieu of non-cash benefits.
The benefit value may vary by role to reflect market practice. It is not anticipated that the current
cost of benefits (as set out in the Annual Report on Remuneration) will increase materially over the
term of this policy, though the Committee retains discretion to approve a higher cost in exceptional
circumstances.
Performance measures
N/A
PENSION
Purpose and link to
strategy
Operation
Opportunity
To provide retirement benefits that are appropriately competitive.
Executive Directors receive a cash allowance in lieu of pension.
The CEO and the CFO respectively receive pension benefits from 1 April 2022 equal to 12.2%, and
11.2% of their salary. Pension benefits will be reduced to 7.5% of salary effective 1 January 2023 to be
fully aligned with that of the wider employee group.
Any new Executive Director will receive pension benefits aligned to that of the wider employee group
(currently 7.5%) at the time of appointment.
Performance measures
N/A
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REMUNERATION COMMITTEE CONTINUED
125
124
GDIP
Purpose and link to
strategy
To drive and reward performance against financial and non-financial KPIs, as well as personal objectives,
all of which are directly linked to business strategy.
Operation
The GDIP is reviewed annually by the Committee at the start of the year to ensure the opportunity and
performance measures are appropriate and continue to support business strategy.
The Committee has discretion to adjust the formulaic outcome of the bonus to more accurately reflect
the underlying business and personal performance during the year.
Performance is measured over one year, and earned awards are delivered 55% in cash and 45% in
nil-cost share options vesting in one-third annual tranches after one, two and three years, subject
to continued employment and good/bad leaver provisions over this period. Vested awards are also
subject to a two-year post-vesting holding period.
Malus and clawback provisions may be applied for a period of two years following payment in
exceptional circumstances, including, but not limited to, misstatement, misconduct or error.
Opportunity
Participants can receive a maximum of up to 180% of their base salary.
For threshold-level and target-level performance, the award earned is up to 20% and 50% of maximum
opportunity, respectively.
Performance measures
Performance is determined by the Committee annually by reference to a scorecard of Group targets
as detailed in the Group’s business plan and encapsulated in specific KPIs, as well as a discretionary
assessment of personal performance.
Group scorecard targets may include one or more of the three key strategic priority areas of Extracting
Maximum Value from Our Operations, Working Responsibly and Maintaining Our Social Licence, and
Preparing for Our Future. The Group scorecard will typically account for 85% of performance bonus in
any one year.
Details of the measures and weightings for the current year are provided in the Annual Report on
Remuneration.
Notes to policy table
PAYMENTS FROM EXISTING ARRANGEMENTS
Executive Directors will be eligible to receive remuneration or
other payments in respect of any award granted or payment
agreed prior to the approval and implementation of the 2021
remuneration policy, or prior to the individual becoming a
Director, if in the opinion of the Committee the payment was not
in consideration for the individual becoming a Director. Details of
any such awards or payments are disclosed in the Annual Report
on Remuneration.
SELECTION OF PERFORMANCE MEASURES (GDIP)
Performance measures used in the Group’s executive incentive
scheme – the GDIP – are selected to ensure incentives reinforce
the Company strategy and align executive interests closely with
those of shareholders. It is the Committee’s opinion that the
financial and non-financial measures used in the GDIP support
the strategic priorities of Extracting Maximum Value from Our
Operations, Working Responsibly and Maintaining Our Social
Licence, and Preparing for Our Future, and are well accepted
measures for the mining sector.
Performance targets are set to be stretching but achievable,
considering a range of reference points including the Group’s
business plan,
its strategic priorities and the economic
environment in which the Group operates. The Committee
believes it has a robust approach to target setting and the
maximum outcomes are achievable only
for exceptional
performance.
REMUNERATION POLICY FOR OTHER EMPLOYEES
Salary reviews are implemented with a consistent approach
across the Group and consider the level of responsibility,
experience, individual performance, market levels and the
Group’s ability to pay.
level) remuneration
Senior management (below Board
is
reviewed by the Remuneration Committee. Senior management
and management level employees participate in an annual
bonus scheme on a similar basis as the Executive Directors,
although the weighting on Group performance measures
increases with seniority and share awards vary appropriately
according to organisational level.
Other employees participate in an annual bonus linked to
operational metrics.
Shareholding guidelines
The in-post guideline was increased in February 2022 to requiring
Executive Directors to hold 200% of their salary in beneficially
owned shares (previously 100% of salary under the 2021 approved
policy). Until the guideline has been met, Executive Directors will
be required to retain 50% of vested awards under the GDIP or any
other share-based incentive.
The post-termination shareholding
for Executive Directors
requires that the in-post shareholding requirement is maintained
for a period of a year following cessation of employment, to be
achieved through the continued holding of vested share awards
granted after the introduction of the 2021 Remuneration Policy.
A formal policy has been implemented to ensure in- and
post-termination shareholding
requirements are managed
appropriately.
Pay for performance: scenario analysis
for 2022
The table and subsequent graph below illustrates an estimate
of the potential future remuneration for the Executive Directors
and the potential split between the different elements of pay
under four performance scenarios: fixed, at target, maximum, and
maximum +50% share price appreciation. Potential remuneration
is calculated on the incentive opportunities set out in the 2021
remuneration policy applied to the salaries effective 1 April 2022.
The maximum GDIP is 180% of the salary.
The fixed scenario includes base salary, pension and benefits only.
The at-target scenario includes fixed remuneration as above, plus
target pay-out of the GDIP.
The maximum scenario includes fixed remuneration, plus full
pay-out and vesting of all incentives.
The maximum +50% scenario is the same as the maximum
scenario as the deferred share element of the GDIP is not subject
to performance conditions over the deferral period.
The assumptions are summarised in the table below:
Component
Fixed
At target
Maximum
Maximum +50% share
price appreciation
Salary
Benefits
Pension
Base salary for 2022
5.5% and 6.0% of salary for the CEO and the CFO respectively
12.2% and 11.2% of salary for the CEO and the CFO respectively, in 2022
GDIP (cash)
0% of maximum
50% of maximum
100% of maximum
100% of maximum
GDIP (deferred shares)
0% of maximum
50% of maximum
100% of maximum
100% of maximum
Total (£’000)
CFO (%)
396
700
1 003
1 003
Total (£’000)
602
1 063
1 523
1 523
CEO (%)
19
24
27
27
19
24
27
27
33
33
33
33
100
57
40
40
100
57
40
40
Minimum
On-target
Maximum
Maximum +50
Minimum
On-target
Maximum
Maximum +50
FIXED REMUNERATION
GDIP (CASH)
GDIP (DEFERRED SHARES)
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REMUNERATION COMMITTEE CONTINUED
REMUNERATION COMMITTEE CONTINUED
Approach to remuneration on
executive recruitment
The Committee will follow the Remuneration Policy as set out
in the policy table when recruiting new Executive Directors.
Any arrangement specifically established to recruit an external
Executive Director would be capped at the limits described in
the policy table on appointment. Where an individual forfeits
outstanding incentive payments and/or contractual rights at a
previous employer because of their appointment, the Committee
may offer additional compensatory payments or awards (buy-
out) in such form as it considers appropriate. Any such buy-
out compensation would be on a comparable basis to the
forfeited benefit, considering factors including the performance
conditions attached to these awards, the likelihood of conditions
being met, and the remaining vesting period of these awards. The
Committee would normally use the remuneration components
under the regular policy to make such buy-out awards, but may
also exercise its discretion under Listings Rule 9.4.2 if an alternative
incentive structure were required. Where an Executive Director is
required to relocate from their home location to take up their role,
the Committee may provide reasonable, time-limited assistance
with relocation in line with local market norms.
In the case of internal promotions, any commitments made
prior to promotion and the approval of the remuneration policy
(except for pension entitlements) will be honoured. Where the
new appointee has an initial salary set below market, any shortfall
will be managed with phased increases over a period of several
years, subject to the individual’s performance and development
in the role.
Service contracts
The Company’s policy is to limit termination payments to pre-established contractual arrangements. If the employment of an Executive
Director is terminated, any compensation payable will be determined in accordance with the terms of the service contract between the
Company and the employee, as well as the rules of any incentive plans. Details of the Executive Directors’ service contracts are summarised
in the table below.
Director
Contract date
Unexpired
Notice period
Contractual termination payment
CT Elphick
13 February 2007
M Michael
22 April 2013
Rolling contract
12 months
Pay basic salary on summary termination. Benefits are
payable only at the Committee’s discretion.
Payments for loss of office under all service contracts
On termination of an Executive Director’s contract, payments equal to salary in lieu of notice may be made monthly during the notice
period. Benefits are payable only at the Committee’s discretion. Payment in lieu of unused annual leave entitlement can be made at the
effective salary rate at the point of termination.
Where employment is terminated by the Company and the departing Executive Director has a legal entitlement (under statute or otherwise)
to additional amounts, these would need to be met. Should the Company wish to enter into a settlement agreement and the individual
seeks independent legal advice, the Committee retains discretion to settle any claims by or on behalf of the Executive Director in return for
making an appropriate payment and contributing to the legal fees incurred by the Executive Director in connection with the termination
of employment.
In exceptional circumstances, the Committee may approve new contractual arrangements with departing Executive Directors including
(but not limited to) settlement, confidentiality, outplacement services, restrictive covenants and/or consultancy arrangements. These will
be used only in circumstances where the Committee believes it is in the best interests of the Company and its shareholders to do so.
The table below provides details of exit payments under different leaver scenarios.
Incentive
Scenario
Time of payment/vesting
GDIP awards, prior to
end of performance
period
Death, disability, ill health, redundancy,
retirement, or any other reasons the
Committee may determine (normally
not including resignation or where
there are concerns as to performance)
Normal payment date,
although the Committee has
discretion to accelerate (for
example, in relation to death)
Change of control (whether or not
employment is terminated as a result)
Immediately, on change of
control
Calculation of payment/
vesting
Performance against targets
will normally be assessed by
the Committee at the end
of the year and any resulting
award is normally pro-rated
for the proportion of the year
worked
Performance against targets
will normally be assessed by
the Committee up to the date
of change of control and any
resulting award is normally pro-
rated for time
All other reasons
Not applicable
No award is paid
GDIP (unvested
nil-cost options)
Death, disability, ill health, redundancy,
retirement, or any other reasons the
Committee may determine (normally
not including resignation or where
there are concerns as to performance)
Normal vesting date, although
the Committee has discretion
to accelerate
Unvested awards will normally
be pro-rated for time unless the
Committee decides otherwise
Change of control (whether or not
employment is terminated as a result)
Immediately, on change of
control
All other reasons
Not applicable
GDIP (nil-cost
options/shares in
holding period)
Death, disability, ill health, redundancy,
retirement, or any other reasons the
Committee may determine (normally
not including resignation or where
there are concerns as to performance)
Normal vesting date, although
the Committee has discretion
to accelerate
Unvested awards will normally
be pro-rated for time unless the
Committee decides otherwise
Awards lapse
Not applicable
Change of control (whether or not
employment is terminated as a result)
Immediately, on change of
control
All other reasons
Normal release date, although
the Committee has discretion
to accelerate
Not applicable
Not applicable
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REMUNERATION COMMITTEE CONTINUED
REMUNERATION COMMITTEE CONTINUED
Non-Executive Directors
Non-Executive Directors do not receive benefits from the Company and they are not eligible to participate in any cash or share-based
incentive scheme.
Directors’ fees
Purpose and link to strategy
To attract and retain a high-calibre Chairperson and non-Executive Directors with
experience relevant to the Company.
Operation
Fees are reviewed annually, with any changes effective from 1 April.
Fees are typically set after considering current market levels, time commitment and
responsibilities involved.
All non-Executive Directors, including the Chairperson, are each paid an all-inclusive fee.
No additional fees are paid for chairing Committees.
All fees are payable monthly in cash in arrears.
The non-Executive Directors do not participate in any of the Group’s incentive plans. No
other benefits or remuneration are provided to non-Executive Directors.
Opportunity
There is no prescribed maximum annual increase.
It is expected that fee increases will typically be in line with market levels of fee inflation.
In certain circumstances (for example, where there is a change in time commitment
required or a material misalignment with market), the Committee has the discretion to
adjust fee levels to ensure they remain competitive.
The maximum aggregate annual fee for all non-Executive Directors, including the
Chairperson, allowed by the Company’s Articles of Association, is £750 000.
Director
Contract date
Unexpired term
Notice period
Contractual
termination payment
H Kenyon-Slaney
6 June 2017
ANNUAL REPORT ON REMUNERATION
This report provides information regarding the implementation of the Company’s approved 2021 Remuneration Policy during the financial
year ended 31 December 2021, and how the 2021 Remuneration Policy will be implemented in 2022. This Annual Report on Remuneration
will be subject to an advisory vote at our 2022 AGM on 8 June 2022.
Role, composition and experience of the Committee
The Committee’s terms of reference are available on the Company’s website and comply with the UK Corporate Governance Code.
The role of the Committee is to assist the Board to fulfil its responsibility to shareholders to ensure
that:
•
•
Remuneration policy and practices of the Group are designed to support strategy and promote
long-term sustainable success, and reward fairly and responsibly, with a clear link to corporate
and individual performance, having regard to statutory and regulatory requirements; and
Executive remuneration is aligned to Group purpose and values and linked to the delivery of
the Group’s long-term strategy.
Membership as at 31 December 2021:
• M Lynch-Bell
• H Kenyon-Slaney*
Michael Lynch-Bell
•
R Kainyah (member from 2 June 2021)
Chairperson
• M Brown (member until 1 June 2021)
Non-Executive Director
Other attendees:
• C Elphick*
• M Michael*
• Group Human Resources Manager
•
Ellason (Independent remuneration consultants)
Secretary (Bruce Wallace Associates)
•
* Except when issues relating to their own remuneration are discussed.
M Brown
M Lynch-Bell
M Maharasoa
R Kainyah
1 July 2019
1 May 2021
1 January 2018
15 December 2015
Rolling appointment
Three months
No provision for payment
of compensation
Remuneration Committee skills (%)
Considerations of shareholder views
The Committee considers shareholder views and the guidelines
of
investor bodies when determining remuneration. The
Committee values feedback from shareholders on the Company’s
remuneration policy and commits to consulting shareholders in
advance of any significant changes to the policy. Details on the
votes received on the 2020 Annual Report on Remuneration and
2021 Remuneration Policy (at the 2021 AGM) are provided in the
Annual Report on Remuneration.
External directorships
Executive Directors are permitted to accept external directorships
with prior approval of the Chairperson. Approval will only be
given where the appointment does not present a conflict of
interest with the Group’s activities and the experience gained will
be beneficial to the development of the individual. Where fees
are payable in respect of such appointments, these would be
retained by the Executive Director. Refer to page 133 for further
details.
Senior executive
International markets
Core industry
Environmental/Social
M&A/Capital markets
Financial/Audit and Risk
Legal/Regulatory
Health and safety
Technical/Engineering
100%
78%
78%
78%
67%
67%
67%
56%
44%
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REMUNERATION COMMITTEE CONTINUED
REMUNERATION COMMITTEE CONTINUED
2021 activities
Link to strategic pillar
Reviewed the remuneration policy to ensure it is appropriate to motivate and reward senior executives and
align their interests with the Company’s purpose and values, as well as the interest of shareholders
Considered the effectiveness of short- and long-term incentive structures and the alignment with
shareholder expectations
Reviewed the implementation of in- and post-termination shareholding policies
Reviewed the range of non-financial performance metrics in variable remuneration
Ensured incentives include an appropriate balance of financial and non-financial elements for the long-term
sustainability of the organisation
Applied its collective mind to the determination of discretionary elements in the GDIP scorecard and the
appropriateness of the formulaic output from the incentive calculations, to ensure these accurately reflect
performance during the year
Reviewed and approved the terms of reference of the Committee
Reviewed and approved the Directors’ Remuneration Report for 2020
Reviewed and approved base salaries and total remuneration for the Executive Directors and fees for non-
Executive Directors and reviewed senior management remuneration in line with consideration of recent
developments in remuneration market trends and best practice
Extracting maximum value
from our operations
Working responsibly and
maintaining our social licence
Preparing for our future
CONSIDERATION OF INDEPENDENCE
Ellason LLP was appointed by the Committee in January 2021 and provided independent remuneration advice to the Committee
and attended Committee meetings during 2021. Ellason LLP provides remuneration advice to a large portfolio of clients, including
many in the FTSE350 and FTSE Small Cap, reassuring the Committee that the advice provided is appropriate and relevant.
Ellason LLP is a signatory to, and abides by, the Remuneration Consultants Group Code of Conduct. Further details can be found at
www.remunerationconsultantsgroup.com.
Ellason LLP does not provide non-remuneration services to the Group and is in no other way connected to the Group, and is therefore
considered to be independent. The fees payable in relation to work for the Committee in 2021 were US$29 278, excluding VAT.
Summary of shareholder voting
The table below shows the results of the advisory vote on the 2020 Annual Report on Remuneration at the 2021 AGM, and the binding vote
on the 2021 Remuneration Policy at the 2021 AGM.
For
Against
Total votes cast
Withheld
2020 Annual Report on
Remuneration
2021 Remuneration
Policy
Total number of votes
100 217 068
11 542 203
111 759 271
85 471
Percentage of votes cast
89.7%
10.3%
–
Total number of votes
101 332 434
10 512 308
111 844 742
Percentage of votes cast
90.6%
9.4%
–
–
–
–
Wider employee considerations
The Committee considers Executive Director remuneration
in the context of pay policies and practices across the wider
employee group. We value and appreciate the contribution
made by our employees and aim to provide them with market-
competitive remuneration and benefit packages. Our approach
to remuneration for our wider employee group is similar to that
of Executive Directors and includes both fixed and performance-
based components.
Base salaries are reviewed annually, and any increases become
effective from either 1 January or 1 March, dependent on
operation-specific remuneration policies. The Committee reviews
salary increases for the wider employee group and significant
changes in practice or policy.
All employees participate in an annual discretionary bonus
scheme that rewards both an employee’s contribution to the
performance of the Group and their individual performance.
The majority of our employees receive an employer pension
contribution equal to 7.5% of salary per annum and may opt to
join a medical aid scheme to which the Company contributes
50% up to a capped amount.
We have an open, collaborative and inclusive management
structure and engage regularly with our employees on a range of
issues. The designated non-Executive Director, Mazvi Maharasoa,
conducts formal engagement sessions with employees across
the Group. The structure of the engagement sessions was
reviewed during 2021 to determine whether the quality of the
sessions could be improved. Following the review, a formal
engagement plan was approved for 2022 which would see the
Remuneration Committee Chairperson annually attend one
engagement session per operational site. This would afford
the opportunity for engagement with the workforce as to how
executive remuneration supports strategy and aligns with that of
the employees. Company culture is monitored and assessed by
the Board on a quarterly basis against pre-determined metrics.
Gender pay considerations
We have not included a UK gender pay gap report, as the Company
has only one employee based in the UK, and any resulting ratios
would not be meaningful. The Committee reviewed gender pay
across the various employee levels in the Group and is satisfied
that no material differences exist between genders.
Relative importance of spend on pay
The table below shows the percentage change in total employee
pay expenditure and shareholder distributions (ie dividends,
share buy-backs and return of capital) from the financial
year ended 31 December 2020 to the financial year ended
31 December 2021.
2021 US$
2020 US$ % increase
3 794 431
3 509 082
0.1
19 347 781
19 735 981
Distribution to
shareholders1
Employee
remuneration2
Return of capital3
–
–
(2)
–
1 The proposed distribution to shareholders on the 2022 dividend payment date is currently unknown, therefore the distribution is valued using the shares in issue as at 31 January 2022.
The 2020 figures have been adjusted to reflect the actual distribution on the dividend payment date of 15 June 2021.
Includes salary, pension and benefits, bonus, accounting charge for the ESOP, and employer national insurance contribution.
2
3 Any other significant distributions and payments or other uses of profit or cash-flow deemed to assist in understanding the relative importance of spend on pay.
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133
REMUNERATION COMMITTEE CONTINUED
REMUNERATION COMMITTEE CONTINUED
Pay for performance
The graph shows the Company’s TSR performance compared to the performance of the TSR Peer Group and the FTSE 350 Mining Index over
the 10-year period to 31 December 2021. The TSR Peer Group has been selected to provide a diamond miner comparator group and the
FTSE 350 Mining Index has been selected as the Group and the constituents of the index are affected by similar commercial and economic
factors. The table below the graph details the CEO’s single figure of remuneration and actual variable pay outcomes over the same period.
Value of £100 invested on 1 January (Gem Diamonds vs. FTSE350 Mining Index and 2021 TSR Peers (£))
200
150
100
50
0
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
GEM DIAMONDS LTD
FTSE 350 MINING INDEX
MEDIAN 2021 TSR PEERS
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
CEO single figure of
remuneration (£)
Annual bonus outcome
(% of maximum)
ESOP vesting outcome
(% of maximum)
797 755 564 419 776 406 892 935 879 719 611 314 681 191 995 161 891 643 989 921 1 006 724
75
–
13
–
61
–
83
–
74
–
–
20
83
63
66
39
28.3
14.5
21.4
25.9
65.9
60.1
The percentage change in Director remuneration compared to other employee pay
The table on the next page shows a comparison of the annual change of each individual Director’s pay to the annual change in average
employee pay for the year ended 31 December 2021. Average employee pay is calculated using a mean average. The parent company
consists of only one employee who is not a Director, and the Company therefore chose to voluntarily disclose the change in Directors’
remuneration compared to a wider employee comparator group, as this will provide a more representative comparison. Where there is a
year-on-year increase in base salary or fees paid to the Directors, this is due to reinstatement of salaries and fees following COVID-19-related
sacrifices in 2020.
2021
2020
Base
salaries1
(% change)
Benefits
(% change)2
Annual
bonuses
(% change)3
Base salaries
(% change)
Benefits
(% change)
Annual
bonuses
(% change)
Executive Directors
C Elphick
M Michael
Non-Executive Directors
H Kenyon-Slaney
M Lynch-Bell
M Brown
J Velloza4
M Maharasoa
R Kainyah5
Average pay of comparator group
employees6
4.1
4.1
4.1
4.1
4.1
4.1
4.1
–
5.9
(0.9)
(0.7)
(27.1)
(27.1)
(1.3)
(1.3)
(14.5)
(16.0)
(16.0)
(12.0)
96.0
–
–
–
–
–
–
–
–
–
3.7
4.7
–
–
–
–
–
–
–
–
–
–
–
–
(19.9)
(2.0)
0.7
4.9
–
–
–
–
–
–
–
1 The annual percentage change in salary is calculated by reference to actual salary paid for the financial year ended 31 December 2021, compared to the financial year ended
31 December 2020. The increase in salaries and fees reflect the reinstatement to contractual levels following the COVID-19-related sacrifice in 2020.
2 The annual percentage change in benefits is calculated by reference to the benefits as a % of salary in respect of the financial year ended 31 December 2021, compared to the financial
year ended 31 December 2020.
3 The annual percentage change in bonus is calculated by reference to the % of annual salary achieved for the financial year ended 31 December 2021, compared to the financial year
ended 31 December 2020. For 2021, the cash portion of the GDIP is included and the deferred portion is excluded.
4 Stepped down from the Board on 1 May 2021. Fees were calculated on a full-time equivalent basis.
5 Appointed to the Board on 1 May 2021.
6 Average employee pay is calculated by reference to the mean average pay of employee comparator group.
Executive Directors’ external appointments
Apart from interests in private entities, only Clifford Elphick holds any significant executive directorship or appointments outside the Group.
He is appointed as the non-Executive Chairperson of Zanaga Iron Ore Co Limited, which listed on the AIM Market of the London Stock
Exchange in November 2010. Total fees paid to Clifford Elphick by Zanaga are £83 000. Any fees paid to Clifford Elphick in fulfilling these
external roles are retained by him.
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REMUNERATION COMMITTEE CONTINUED
REMUNERATION COMMITTEE CONTINUED
Salary increases
The Committee did not approve any salary increases for the Executive Directors in 2021:
Executive Director
C Elphick
M Michael
2021 salary
£
20201 salary
£
%
increase
491 902
324 635
491 902
324 635
–
–
1 This figure does not reflect the COVID-19 salary sacrifice of 4.1% during 2020
Pension and other benefits
No formal pension provision is made by the Company. Instead, Executive Directors receive a cash allowance in lieu of pension. In 2021,
the pension allowance for the CEO and CFO was reduced to 13.3% and 12.1% of salary respectively, in line with the commitment to align
pensions with the wider employee group over time. Executive Directors received a cash allowance in lieu of other non-cash benefits, the
values of which were 5.5% and 6.0% of salary respectively for the CEO and the CFO.
Implementation of remuneration policy for 2021
TOTAL SINGLE FIGURE OF REMUNERATION FOR DIRECTORS
The table below sets out the total single figure remuneration received by each Director for 2021 and the prior year. Although the Group’s
reporting currency is US dollars, these figures are stated in sterling, as the Directors’ emoluments are based in sterling.
Salary and fees1
Cash payments in lieu of
other non-cash benefits2
Cash payments in
lieu of pension2
Total fixed
remuneration
GDIP (cash)3
STIB3
GDIP
(share
options)4
ESOP4
Total variable
remuneration
Total
2021
£
2020
£
2021
£
2020
£
2021
£
2020
£
2021
£
2020
£
2021
£
2020
£
2021
£
2021
£
2020
£
2021
£
2020
£
2021
£
2020
£
491 902
324 635
472 611
311 904
27 055
19 478
25 994
18 714
66 899
40 011
68 529
40 547
585 856
384 124
567 134
371 165
191 404
129 533
326 379
218 643
156 604
105 981
72 860
53 853
96 408
71 258
420 868
289 367
422 787
289 901
1 006 724
673 491
989 921
661 066
122 400
56 100
56 100
37 400
56 100
37 400
117 600
53 900
53 900
107 800
53 900
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
122 400
56 100
56 100
37 400
56 100
37 400
117 600
53 900
53 900
107 800
53 900
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
11 649
–
–
–
–
–
–
–
–
–
–
–
11 649
–
–
122 400
56 100
56 100
37 400
56 100
37 400
117 600
53 900
53 900
119 449
53 900
–
Executive Directors
C Elphick
M Michael
Non-Executive Directors
H Kenyon-Slaney
M Lynch-Bell
M Brown
J Velloza5
M Maharasoa
R Kainyah6
1 Salary and fees. The increase relates to the reinstatement of salaries following the COVID-19 sacrifice in 2020.
2 Benefits and pension: cash payments in lieu.
3
4
Includes the cash component of the GDIP (in 2021) and previous STIB (in 2020).
The 2021 GDIP (share options) figures relate to the value of deferred nil-cost share options to be awarded in 2022 following the release of the annual results. The 2021 ESOP figures relate
to the values at vesting of awards vesting on performance over the three-year period ended 31 December 2021. The share price on the vesting date is currently unknown, therefore the
awards are valued using the three-month average share price to 31 December 2021 of 52.69 pence. The 2021 values at vesting reflect the impact of a 42% reduction in share price over
the period. The 2020 figures have been adjusted to reflect the share price on the vesting date of 63.6 pence.
Fees are 50% standard fees and 50% additional fees related to special projects. J Velloza stepped down from the Board as of 1 May 2021.
The 2021 fees relate to the period 1 January 2021 to 30 April 2021. ESOP vesting relates to awards granted prior to his appointment as a non-Executive Director.
5
6 R Kainyah was appointed to the Board in May 2021. The 2021 fees relate to the period 1 May 2021 to 31 December 2021.
GDIP IN RESPECT OF 2021 PERFORMANCE
Executive Directors participated in the GDIP in 2021, a discretionary incentive arrangement focused on the strategic areas of Extracting
Maximum Value from Our Operations, Working Responsibly and Maintaining Our Social Licence, and Preparing for Our Future, all of which
are underpinned by specific KPIs and included in the business plan approved by the Board.
In 2021, the maximum award opportunity for the Executive Directors was 180% of base salary. The earned incentive is paid in cash (55%)
and a nil-cost share award (45%), vesting subject to continued employment over three years. Pay-out is based 85% on a business scorecard
and 15% on personal objectives assessed on a discretionary basis by the Remuneration Committee. The business scorecard performance
measures, targets and actual outturns for 2021 are disclosed in full in the table on page 136.
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137
REMUNERATION COMMITTEE CONTINUED
REMUNERATION COMMITTEE CONTINUED
Performance measure
Preparing for Our Future
As set out in strategic focus areas
Extracting Maximum Value
Underlying EBITDA (US$ millions)
Costs
» Corporate costs (US$ millions)
» Cost per tonne (LSL)
Carats recovered (carats)
Working Responsibly and
Maintaining Our Social Licence
Any fatality will result in 100% forfeiture of this element
All Injury Frequency Rate (AIFR)
Lost Time Injury Frequency Rate (LTIFR)
Any major environmental/community incident will
result in 100% forfeiture of this element
Weighting
(% of max)
Threshold
Stretch
Actual
performance
Pay-out
(% of max)
10.0 Judged by Committee on a discretionary basis
61.2
82.9
57.4
7.2
347
111 273
6.5
314
136 000
7.2
386
115 335
–
2.20
0.11
–
–
1.25
–
–
–
0.93
0.24
–
30.0
1.5
13.5
10.0
5.0
5.0
5.0
5.0
85.0
8.5
–
0.3
–
3.0
5.0
5.0
–
5.0
26.8
Preparing for Our Future
Following the implementation of the BT programme in 2017 and the approval of the Bankable Plan for the Group of US$40 million
(US$31 million annual and US$9 million once-off savings), a four-year US$100 million target was set in 2018 (to be delivered by end of 2021).
This was impacted by COVID-19 and the operational shutdown due to the in-country lockdown in 2020. Notwithstanding these challenges,
the US$100 million four-year target was exceeded by achieving US$110.0 million on time.
During 2021, the Group faced numerous waves of the COVID-19 pandemic. Rapid roll-out of testing, establishment of the analysis laboratory
on site in 2020, and the stringent continuation of protocols and use of these facilities in 2021 enabled uninterrupted operations.
The Group undertook a comprehensive debt refinancing project due to the expiry of its current facilities. The objective was to expand
its lender group and to further upsize the Group’s available facilities. This was successfully concluded and in addition, US$32.3 million
of the facilities are Sustainability-Linked Loans where the margin and resultant interest rate will decrease if the Group meets certain
carbon reduction and water conservation KPIs that are aligned with the Group’s sustainability strategy. These facilities are renewable in
December 2024 and strengthen the Group’s balance sheet appropriately for the next three years. Further to this, the Group successfully
concluded its CCSA to identify and assess its physical climate change risks as part of the adoption of the TCFD recommendations.
In-country Competition Commission and Government approvals were received in terms of the Conditions Precedent as set out in the sales
agreement for the disposal of the Ghaghoo asset. However, the sale was not concluded prior to year end, as the purchaser requested an
extension of time to secure an alternative financing partner.
During the year the Group commenced a preliminary conceptual study on the potential economic viability and mining method for
underground expansion of the Satellite pipe at Letšeng (with the potential to include the Main pipe in the future).
The Committee reviewed performance in this area during 2021 on a holistic basis, and determined that a score of 8.5 out of 10 was
appropriate.
Personal performance
15% of the GDIP is linked to personal performance, with objectives linked to each Executive Director’s individual areas of responsibility and
designed to collectively support the achievement of the Group’s strategic targets for the year. Individual targets comprised contributions
to the Group’s overall performance and the delivery of strategic projects and initiatives as set out by the Board, including operational
performance, strengthening of key stakeholder relationships, bank financing, treasury management, ESG objectives and strategy
development and implementation. Following the Committee's consideration of the Executive Directors' personal performance as set out in
the tables below, the Committee awarded scores of 12.5% and 13.5% (out of 15%) respectively for the CEO and CFO.
Clifford Elphick
Strategic focus area
Performance
• During the year, numerous assets and projects were reviewed and potential parties were engaged as part
of the strategic focus on growth and expansion.
•
•
•
•
•
The continued participation in the GIA's blockchain initiative provides assurance to end-consumers
around the provenance of the rough diamonds and the contribution of the diamond industry to Lesotho.
The first Dubai trial tender viewing was held in September, making it easily accessible for important clients
from the UAE, India and Israel to participate in the tender. The response was overwhelmingly positive and
contributed to the robust prices achieved.
Succession planning across the Group was progressed with an increased focus on diversity and inclusion.
This specifically led to the appointments of the Head of Operations and Head of Finance at Letšeng.
Training spend on the development of female employees was significantly higher than in prior years.
The gap analysis on the adopted UN SDG framework was completed in 2021, laying the foundation for
implementation in 2022.
Behaviour driving culture was monitored on a quarterly basis and initiatives were implemented to ensure
that it continued to align with business goals.
Michael Michael
Strategic focus area
Performance
• Comprehensive debt refinancing was concluded which added a new funder to the lender group and
resulted in an increase of facilities at Letšeng. This strengthened the Group's balance sheet appropriately
for the next 3 years.
• During the year a review of the Group’s capital allocation was undertaken. The reviewed dividend policy
was implemented and a dividend payment was effected.
• Continuous Improvement projects were rolled out in the year achieving financial benefits. These projects
included waste reduction through shorter haulage (c. LSL30.0 million p.a.), electricity efficiencies through
geyser and heating timers as well as drilling efficiencies through drilling depth accuracy.
•
•
The Group successfully concluded and delivered the CCSA to identify and assess the physical climate
change risks as part of the adoption of the TCFD recommendations. The scenario analysis considered four
climate-related scenarios, which will allow the Group to work towards developing an effective response.
Various risk management processes were embedded and advanced during the year. These included the
conclusion of the insurance risk transfer process and establishment of a LSL100m self-insurance fund.
Extracting maximum value
from our operations
Working responsibly and
maintaining our social licence
Preparing for our future
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139
REMUNERATION COMMITTEE CONTINUED
REMUNERATION COMMITTEE CONTINUED
The formulaic outcome from the business scorecard for Group performance was 26.8% (out of the maximum 85%) which, combined with
the personal element, resulted in formulaic GDIP outcomes of 39.3% and 40.3% of maximum for the CEO and the CFO, respectively.
Based on business and personal performance, the GDIP incentive for 2021 was as follows:
Vesting of the awards was dependent on relative TSR against companies in the diamond mining sector (25% of the award) and BT (25%)
measured over the period 1 January 2019 to 31 December 2021. Profit and production (50%) were measured on an annual basis with respect
to the business plan for the year, with final vesting based on the average achievement of targets over the three years. The performance
conditions that applied to these awards are summarised in the table below.
Executive Directors as at 31 December 2021
C Elphick
M Michael
Total
Performance
score (%)
Deferred
nil-cost
options (£)1
Cash (£)
Total (#)
39.3
40.3
191 404
129 533
156 604
105 981
348 008
235 514
1 The deferred nil-cost options will be granted in 2022 and will be subject to the rules as set out in the Directors Remuneration Policy on page 122.
ESOP: 2019 AWARDS VESTING IN 2022
The Executive Directors were granted awards of performance shares in March 2019, which are set out in the table below.
Number
options
granted
Share price
on date of
award
£
Face value
on date of
award
£
Face value
as % of
salary
Date of
grant
Vesting date
Executive Directors as at 31
December 2021
C Elphick
M Michael
20 March 2019
20 March 2019
230 000
170 000
0.904
0.904
207 920
153 680
44 20 March 2022
50 20 March 2022
PERFORMANCE MEASURE
TSR versus diamond mining
peer group
BT
Underlying EBITDA (US$ million)
EPS (US cents)
US$ per carat
Ore tonnes treated (millions)
Carats recovered (carats)
Weighting
(% of max)
Performance
period
Threshold
(20% vesting)
Stretch
(80% vesting)
Super stretch
(100% vesting)
Actual
performance
3 years
Median
75th
percentile
85th
percentile
Top of group
90.0
55.2
46.5
60.9
10.3
8.7
15.2
1 624
1 490
1 396
6.6
6.6
5.5
100.0
110.0
110.0
82.8
69.8
91.4
15.4
13.0
22.7
2 198
2 015
1 888
6.9
6.9
5.7
81.0
76.7
100.6
17.0
14.3
25.0
2 417
2 217
2 077
7.2
7.3
6.0
40.9
53.2
57.4
5.1
9.8
10.5
1 637
1 908
1 835
6.7
5.4
5.1
109 800
128 100
140 300
113 974
114 890
134 039
146 804
100 780
122 400
142 800
156 400
115 335
3 years
2019
2020
2021
Average
2019
2020
2021
Average
2019
2020
2021
Average
2019
2020
2021
Average
2019
2020
2021
Average
25
25
10
10
10
10
10
100
Vesting
outcome
(% of max)
25.0
25.0
–
3.8
–
1.3
0
3.1
–
1.0
2.1
6.8
7.4
5.4
3.8
–
–
1.3
3.4
–
–
1.1
60.1
For each measure, for achievement between threshold and stretch, and stretch and super stretch, the award vested on a straight-line basis.
Achievement of less than threshold received no vesting.
Based on performance to 31 December 2021, 60.1% of the maximum award will vest for Clifford Elphick and Michael Michael in March 2022,
subject to their continued employment at the time.
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141
REMUNERATION COMMITTEE CONTINUED
REMUNERATION COMMITTEE CONTINUED
DETAILS OF OUTSTANDING AWARDS OF PERFORMANCE OPTIONS TO DIRECTOR
Performance
options
as at
1 January
20211
Granted
in the
year
Vested
in the
year
Lapsed
in the
year
Exercise
price
£
M Michael
37 0882
–
–
–
177.6
Performance
options
outstanding
as at
31 December
2021
Earliest normal
exercise date
Expiry date
1 January
2016
31 December
2023
37 088
Date of grant
11 September
2012
Audited
1 An option is a right to acquire shares granted under the plan including, unless indicated otherwise, a zero-cost option. The three-month average share price to December 2021 was
52.69 pence. The highest and lowest closing prices in the year were 65 pence and 43.6 pence respectively. Details of the vesting conditions for awards made under the ESOP are included
in note 27 of the financial statements and a full set of the rules will be available for inspection at the AGM.
These awards were granted to M Michael before he became a Director.
2
DIRECTORS’ SHAREHOLDING AND INTERESTS IN SHARES
Details of interests in the share capital of the Company of those Directors in office as at 31 December 2021 are given below. It is confirmed
that there were no changes to the Directors’ holdings between 31 December 2021 and the date of this report. The GDIP deferred scheme
options are not included in the table below. No Director held an interest in the shares of any subsidiary company.
Performance
shares held
Performance
options held
Shares owned
outright as at
31 December
2021
Subject to
perfor-
mance
conditions
Unvested
and
subject to
continued
employ-
ment only
Vested
but not
exercised
Subject
to perfor-
mance
conditions
Vested
but not
exercised
Total
sharehold-
ing as a %
of salary
Share-
holding
guideline
met
9 325 000
171 849
230 000
170 000
138 280
102 207
–
112 042
50 000
–
67 124
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
37 088
999%
52%
–
–
–
–
–
–
–
–
–
–
✔
2
n/a
n/a
n/a
n/a
n/a
Executive Directors
C Elphick1
M Michael
Non-Executive Directors
H Kenyon-Slaney
M Lynch-Bell
M Brown
M Maharasoa
R Kainyah
Audited
1 CT Elphick is interested in these ordinary shares by virtue of his interest as a potential beneficiary in a discretionary trust, which has an indirect interest in those ordinary shares.
2
In terms of the shareholding guidelines, M Michael is required to retain at least 50% of his vested awards until the guideline has been met.
Implementation of remuneration policy for 2022
The Committee determined that base salaries will be increased by 4% for 2022:
Executive Director
C Elphick
M Michael
2022 salary
£
2021 salary
£
%
increase
511 578
337 620
491 902
324 635
4
4
PENSION AND BENEFITS
The Executive Directors will continue to receive cash supplements in lieu of pension and benefits in 2022. From 1 April 2022, the CEO and
CFO pension benefits will reduce to 12.2% and 11.2% of basic salary, respectively. Effective 1 January 2023, pension benefits will further
reduce to 7.5% of basic salary to align with that of the wider employee group; the timing of this alignment has been accelerated (versus
that disclosed in last year’s report) based on the Committee’s consideration of recent investor guidance and market practice. Pension
contributions to any new Executive Director appointments will be capped at the prevailing wider employee group pension rate at the time.
The current allowance in lieu of non-cash benefits will remain unchanged from 2021.
GEM DIAMONDS INCENTIVE PLAN
The Executive Directors will participate in the GDIP in line with the remuneration policy, with a maximum award opportunity of 180% of
salary, and with pay-out based on a scorecard of financial, operational and personal objectives measured over the financial year.
The performance measures will continue to support the delivery of the Group’s key strategic priorities as set out on page 22 of this Annual
Report and Accounts 2021, with 85% linked to business performance and 15% to personal performance. For the business performance
element, performance may continue to be linked to the Group’s three key strategic priorities of Extracting Maximum Value from Our
Operations; Working Responsibly and Maintaining Our Social Licence; and Preparing for Our Future. The weightings that apply to the
elements of the scorecard for 2022 are summarised in the table below.
Personal performance
Group performance
Preparing for Our Future
As set out in strategic focus areas
Extracting Maximum Value
Underlying EBITDA (US$)
Costs
Carats recovered (carats)
Working Responsibly, Maintaining Social Licence
15%
85%
10%
10%
55%
30%
15%
10%
20%
This element of the bonus captures several key metrics around the Group’s environmental, safety and social performance. Consistent
with the other measures for the GDIP scorecard, the exact measures and targets will be disclosed in full in the 2022 remuneration report.
Targets are considered sensitive and will be disclosed in full on a retrospective basis in next year’s report. In approving these targets, the
Committee considered a range of perspectives on performance outcomes, including internal and external reference points.
DILUTION
Employee share awards may be satisfied with newly issued shares
subject to aggregate dilution limits. The issue of shares to satisfy
awards under the Company’s share schemes will not exceed 10%
of the Company’s issued ordinary share capital in any rolling 10-
year period. As of 31 December 2021, a total of 14 051 555 shares
(10% of issued share capital) may be issued pursuant to all current
awards outstanding over the last 10 years.
As at 31 December 2021, the Company’s headroom position,
which remains within the current IA Guidelines, was as shown in
the chart to the right:
DILUTION HEADROOM
%
Headroom
Outstanding options
6.58
3.42
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143
REMUNERATION COMMITTEE CONTINUED
REMUNERATION COMMITTEE CONTINUED
Date of grant
10-Jun-14
01-Apr-15
15-Mar-16
04-Jul-17
20-Mar-18
20-Mar-19
09-Jun-20
No shares were
awarded in 2021
11-Sep-12
10-Jun-14
01-Apr-15
15-Mar-16
04-Jul-17
20-Mar-18
20-Mar-19
09-Jun-20
No shares were
awarded in 2021
Performance
shares1 as at
1 January
2021
58 209
33 425
49 300
59 633
230 000
230 000
230 000
–
890 567
–
–
–
–
–
170 000
170 000
170 000
–
510 000
C Elphick (CEO)
Total
M Michael (CFO)
Total
Audited
1 Conditional right to acquire shares.
Granted in
the year
Vested in
the year
Lapsed in
the year
Exercised in
the year
Exercise price
US$
Market value
at date of
grant
US$
Earliest normal
exercise date
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
151 586
–
–
–
151 586
–
–
–
–
–
112 042
–
–
–
–
–
–
78 414
–
–
–
78 414
–
–
–
–
–
57 958
–
–
–
–
112 042
57 958
58 209
33 425
49 300
59 633
151 586
–
–
–
352 153
–
–
–
–
–
–
–
–
–
–
0.01
0.01
0.01
0.01
0.01
0.01
0.01
–
–
0.01
0.01
0.01
0.01
0.01
0.01
0.01
0.01
–
–
556 200
453 100
322 000
253 000
308 200
274 454
92 742
–
–
68 400
302 400
334 900
238 000
187 000
227 800
202 858
68 548
–
–
Performance
shares
outstanding
as at
31 December
2021
–
–
–
–
–
230 000
230 000
–
Expiry date
10-Jun-24
01-Apr-25
15-Mar-26
04-Jul-27
20-Mar-28
20-Mar-29
09-Jun-30
10-Jun-17
01-Apr-18
15-Mar-19
04-Jul-20
20-Mar-21
20-Mar-22
09-Jun-23
–
–
460 000
01-Jan-16
10-Jun-17
01-Apr-18
15-Mar-19
04-Jul-20
20-Mar-21
20-Mar-22
09-Jun-23
31-Dec-23
10-Jun-24
01-Apr-25
15-Mar-26
04-Jul-27
20-Mar-28
20-Mar-29
09-Jun-30
–
–
–
–
–
112 042
170 000
170 000
–
–
–
452 042
CHAIRPERSON AND NON-EXECUTIVE DIRECTOR FEES
Chairperson and non-Executive Director fees were reviewed in February 2022. Considering appropriate industry benchmarks, it was
decided that fees for the Chairperson will be increased by 10% to £134 640 annually, and the fees for non-Executive Directors will be
increased by 4% to £58 344 annually.
2021Gem Diamonds Limited Annual Report and AccountsPresenting the Gem Diamonds Annual Report and Accounts 2021 | Strategic report | Performance reviewGovernance | Directors’ report | Financial statements | Report on payments to governments | Additional information 144
145
DIRECTORS’ REPORT
DIRECTORS’ REPORT CONTINUED
The Directors are pleased to submit the financial statements of
the Group for the year ended 31 December 2021.
As a British Virgin Islands-registered company, Gem Diamonds
Limited 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.
This requires that the Directors present a Strategic Report
and a Directors’ Report to inform shareholders of the Group’s
performance and prospects and help them assess whether the
Directors performed their fiduciary duty. The 2021 Annual Report
and Accounts discloses how the Directors have performed their
duty to ensure the Group’s continued success, in line with the
Companies Act, 2006.
To ensure compliance 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 2021 Annual Report and
Accounts, indicated by a reference.
The Strategic Report can be found on pages 2 to 46. This has
been prepared to provide the shareholders with a fair review 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. This means that 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 has been prepared based on the knowledge
and information available to the Directors at the date of its
preparation. The Company is under no obligation to update or
revise the Strategic Report during the financial year ahead. The
expectations set out in the forward-looking statements are
reasonable but may be influenced by a wide range of 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 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 85.
DIRECTORS
The Directors, as at the date of this report, are listed on pages
92 to 93 together with their biographical details. Details of the
Directors’ interests in shares and share options of the Company
can be found on page 140.
Directors who held office during
the year and date of appointment/
resignation
Appointment
Resignation
Executive
Directors
C Elphick
M Michael
20 January 2006
22 April 2013
n/a
n/a
Non-Executive Directors
H Kenyon-Slaney
M Brown
M Lynch-Bell
J Velloza
M Maharasoa
R Kainyah
n/a
6 June 2017
1 January 2018
n/a
15 December 2015 n/a
1 July 2018
1 July 2019
1 May 2021
1 May 2021
n/a
n/a
PROTECTION AVAILABLE TO
DIRECTORS
By law the Directors are ultimately responsible for most aspects
of the Group’s business dealings. As a result, 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 believes 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 therefore has, and continues to maintain, 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 94 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 interest of Directors in the shares of the Company is included
on page 140.
SUPPLIERS AND CUSTOMERS
We engage extensively with contractors and suppliers to ensure
alignment, mutual understanding and the sustainability of all
parties especially during COVID-19 operating conditions.
We have ongoing communication with customers and our sales
processes have been adapted to COVID-19 operating conditions.
We achieved market-related prices for our diamonds throughout
the year.
Refer to the our stakeholder relationships section on pages 17
and 21 for more details on our engagement with suppliers,
contractors and customers.
RESULTS AND DIVIDENDS
The Group’s attributable profit after taxation amounted to
US$14.8 million (2020: US$13.6 million).
The Group’s detailed financial results are set out in the financial
statements on pages 147 to 211.
Based on positive earnings generated and disciplined cash
management the Board proposes that a dividend be declared
for the 2021 financial year. The Board has a dividend policy in
place that sets the appropriate dividend each year, based on
consideration of the Group’s cash resources; the level of free
cash flow and earnings generated during the year; and expected
funding commitments for future capital projects. The Board has
a policy to consider special dividends in the event of significant
diamond recoveries and to consider a share buyback programme
should the opportunity arise.
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 85. The financial position
of the Group, its cash flows and liquidity position are described in
the Strategic Report on pages 52 to 59. In addition, Note 26 and
Note 28 to the financial statements include the Group’s 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, debt facilities, 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 prospect of
the Group over a period longer than 12 months as required by
the ’going concern’ provision. The viability statement, aligned
with Provision 31 of the 2018 UK Corporate Governance Code, is
included in the Strategic Report on page 45.
SUBSEQUENT EVENTS
Refer Note 30 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 16 to the financial statements.
As at 16 March 2022, there were 140.5 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.
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 2021, shareholders authorised the
Company to make on-market purchases of up to 14 016 955
of its ordinary shares, representing approximately 10% of the
Company's issued share capital at that time. During 2021, the
Company did not purchase any shares.
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147
147
FINANCIAL
STATEMENTS
DIRECTORS’ REPORT CONTINUED
POLITICAL DONATIONS
The Group made no political donations during 2021.
TCFD, GHG EMISSIONS AND
ENERGY CONSUMPTION
SUMMARY
Information on
the TCFD
recommendations, carbon footprint and energy consumption in
2021 can be found in the Our Approach to Climate Change and
Sustainability sections on pages 26 and 67 respectively.
the Group’s adoption of
By order of the Board
Harry Kenyon-Slaney
Non-Executive Chairperson
16 March 2022
At the 2022 AGM, shareholders will be asked to renew this
authority. The Directors continue to consider various options and
keep the authorisation under regular review. The 2022 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 18.
RESOURCE DEVELOPMENT
The Group’s resource development activities
focused on
enhancing the understanding of existing resources at Letšeng.
The Operations Review on page 60 provides more detail on these
activities. For information on the current Resources and Reserves
Statement visit the Group’s website:
www.gemdiamonds.com.
CORPORATE SOCIAL
RESPONSIBILITY AND
SUSTAINABILITY
Read more about the Group’s 2021 Sustainability Performance,
including CSI
investment, community participation and
environmental management in the Sustainability Report which is
available at
www.gemdiamonds.com.
2021
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149
RESPONSIBILITY STATEMENT OF THE
DIRECTORS IN RESPECT OF THE ANNUAL
REPORT AND FINANCIAL STATEMENTS
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, cash flow 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
16 March 2022
financial statements
The Directors are responsible for preparing the Annual Report
and the Group
in accordance with
International Financial Reporting Standards (IFRS). Having taken
advice from the Audit Committee, the Board considers 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
The Directors must not approve the financial statements unless
they are satisfied that they give a true and fair view of the state
of affairs of the Group, and of their profit or loss for that period.
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.
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 152 to 211, which comprise the consolidated statement of
financial position as at 31 December 2021, and the consolidated
statement of profit or loss, consolidated statement of other
comprehensive income, consolidated statement of changes in
equity and the consolidated statement of cash flows for the year
then ended, and notes to the financial statements, including a
summary of significant accounting policies.
In our opinion, the accompanying consolidated
financial
statements present fairly, in all material respects, the consolidated
financial position of the Group as at 31 December 2021, and of its
consolidated financial performance and consolidated cash flows
for the year then ended in accordance with International Financial
Reporting Standards.
in accordance with
Basis for Opinion
We conducted our audit
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
for Registered Auditors
Conduct
(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 the audit of the
consolidated financial statements of the current period. These
matters were addressed in the context of the audit of the
consolidated financial statements as a whole, and in forming
the auditor’s 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 these matters.
Accordingly, our audit included the performance of procedures
designed to respond to our assessment of the risks of material
misstatement of the consolidated financial statements. The results
of our audit procedures, including the procedures performed to
address the matters below, provide the basis for our audit opinion
on the accompanying consolidated financial statements.
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150
151
INDEPENDENT AUDITOR’S REPORT CONTINUED
INDEPENDENT AUDITOR’S REPORT CONTINUED
Key Audit Matter
GOODWILL IMPAIRMENT
How the matter was addressed in the
audit
Our audit procedures included amongst others the following:
Management performs an annual impairment test on goodwill as
required by IAS 36 Impairment of Assets using discounted future
cash flows. Goodwill relates to the Group’s investment in the Letšeng
Diamond mine.
• We involved our internal valuation specialists as part of our
team to assist in evaluating management’s impairment
methodology and key assumptions used in the impairment
calculations;
There is an inherent uncertainty in forecasting and discounting
future cash flows, which forms the basis of the Group’s value
in use calculations used in the impairment model. This was
amplified due to the economic and other effects of the continued
Covid-19 pandemic including uncertainty around the duration
of the pandemic and timing of the recovery of the various world
economies. The continued volatility in diamond prices, exchange
rates and discount rates resulted in additional audit work in
assessing the Group’s impairment model.
As disclosed in Note 11 Impairment testing and Note 1.2.28 Critical
accounting estimates and judgements, the Group uses discounted
cash flows to determine the value in use for each cash generating
unit, on the basis of the following key assumptions:
• Diamond prices;
•
•
Inflation rates;
Production costs and volumes;
• Capital expenditure;
• Discount rates; and
•
Exchange rates.
Given the above factors, the goodwill impairment, particularly in
the diamond mining industry, required significant audit attention
in the current year through extended sensitivity and stress testings
with different scenarios including the use of our valuation experts.
Other Information
Management is responsible for the other information. The other
information comprises the information included in the 224-page
document titled ‘Gem Diamonds Annual Report and Accounts
2021’. The other information does not include the consolidated
financial statements and our auditor’s report thereon.
Our opinion on the consolidated financial statements does not
cover the other information and we do not express any form of
assurance conclusion thereon.
• Our valuation specialists calculated two independent
weighted average cost of capital (WACC) rates (Revenue
and costs) to compare to management’s WACC’s. Our
independent WACC recalculations were based on publicly
available market data for comparable companies for the
Letšeng Cash Generating Unit (CGU);
• Our valuation specialists calculated an independent net
present value (NPV) to compare to management’s NPV;
• Our valuation specialists assessed the reasonability of the
significant inputs and assumptions used in the impairment
models, such as diamond prices, exchange rates, inflation
rates, by comparing them to independent sources;
• We have performed sensitivity analyses around the key
assumptions used in the impairment model. We did this by
increasing and decreasing the following assumptions in the
model to determine the impact on the headroom between
the value of the recorded assets of the CGU and the value in
use as calculated. These included:
› WACC; and
› Diamond prices
• We assessed the adequacy of the Group’s disclosures in
terms of IAS 36, in the notes to the consolidated financial
statements.
In connection with our audit of the consolidated financial
statements, our responsibility is to read the other information and,
in doing so, consider whether the other information is materially
inconsistent with the consolidated financial statements or our
knowledge obtained in the audit or otherwise appears to be
materially misstated. If, based on the work we have performed,
we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to
report in this regard.
is responsible
Responsibilities of Management for the
Consolidated Financial Statements
fair
Management
in
presentation of the consolidated
accordance with
internal control as
management determines is necessary to enable the preparation
of consolidated financial statements that are free from material
misstatement, whether due to fraud or error.
for the preparation and
financial statements
IFRSs, and
for such
In preparing the consolidated financial statements, management
is responsible for assessing the Group’s ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless
management either intends to liquidate the Group or to cease
operations, or has no realistic alternative but to do so.
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 identity 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)
16 March 2022
102 Rivonia Road, Sandton, Private Bag X14, Sandton, 2146
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153
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
FOR THE YEAR ENDED 31 DECEMBER 2021
CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2021
Profit for the year
Other comprehensive loss that will be reclassified to the Consolidated Statement of
Profit or Loss in subsequent periods
Exchange differences on translation of foreign operations, net of tax
Other comprehensive loss for the year, net of tax
Total comprehensive income for the year, net of tax
Attributable to:
Equity holders of the parent
Non-controlling interests
Notes
2021
US$’000
2020
US$’000
27 353
24 278
(21 196)
(14 049)
(21 196)
(14 049)
6 157
10 229
(154)
6 311
3 779
6 450
CONTINUING OPERATIONS
Revenue from contracts with customers
Cost of sales
Gross profit
Other operating expense
Royalties and selling costs
Corporate expenses
Share-based payments
Foreign exchange gain/(loss)
Operating profit
Net finance costs
– Finance income
– Finance costs
Profit before tax for the year from continuing operations
Income tax expense
Profit after tax for the year from continuing operations
DISCONTINUED OPERATION
Loss after tax from discontinued operation
Profit for the year
Attributable to:
Equity holders of parent
Non-controlling interests
Earnings per share (cents)
– Basic earnings for the year attributable to ordinary equity holders of the parent
– Diluted earnings for the year attributable to ordinary equity holders of the parent
Earnings per share (cents) for continuing operations
– Basic earnings for the year attributable to ordinary equity holders of the parent
– Diluted earnings for the year attributable to ordinary equity holders of the parent
Notes
2021
US$’000
2020
US$’000
2
3
27
4
4
5
201 859
(121 587)
189 647
(113 802)
80 272
(591)
(21 918)
(8 886)
(395)
1 929
50 411
(3 742)
202
(3 944)
75 845
(3 911)
(19 843)
(7 992)
(555)
(880)
42 664
(4 411)
382
(4 793)
46 669
38 253
6
(15 562)
(10 711)
31 107
27 542
15
(3 754)
(3 264)
27 353
24 278
7
14 767
12 586
13 641
10 637
10.5
10.4
13.2
13.0
9.8
9.6
12.1
11.9
2021Gem Diamonds Limited Annual Report and AccountsPresenting the Gem Diamonds Annual Report and Accounts 2021 | Strategic report | Performance reviewGovernance | Directors’ report | Financial statements | Report on payments to governments | Additional information 154
155
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2021
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2021
ASSETS
Non-current assets
Property, plant and equipment
Right-of-use assets
Intangible assets
Receivables and other assets
Deferred tax assets
Current assets
Inventories
Receivables and other assets
Income tax receivable
Cash and short-term deposits
Assets held for sale
Total assets
EQUITY AND LIABILITIES
Equity attributable to equity holders of the parent
Issued capital
Share premium
Other reserves
Accumulated losses
Non-controlling interests
Total equity
Non-current liabilities
Interest-bearing loans and borrowings
Lease liabilities
Trade and other payables
Provisions
Deferred tax liabilities
Current liabilities
Interest-bearing loans and borrowings
Lease liabilities
Trade and other payables
Income tax payable
Liabilities directly associated with the assets held for sale
Total liabilities
Total equity and liabilities
Approved by the Board of Directors on 16 March 2022 and signed on its behalf by:
C Elphick
Director
M Michael
Director
Notes
2021
US$’000
2020
US$’000
8
9
10
12
22
13
12
20
14
15
16
16
17
18
19
21
22
17
18
19
20
15
293 627
3 137
11 962
1 278
5 117
315 121
31 158
4 095
1 232
30 913
67 398
2 097
304 005
4 823
12 997
153
6 346
328 324
26 741
5 686
106
49 820
82 353
3 528
384 616
414 205
1 406
885 648
(226 697)
(500 550)
159 807
86 843
246 650
8 340
3 851
2 095
11 202
82 472
1 397
885 648
(212 164)
(511 808)
163 073
84 422
247 495
1 702
4 902
2 029
12 331
84 538
107 960
105 502
2 704
973
22 188
41
25 906
4 100
14 385
1 836
28 823
11 940
56 984
4 224
137 966
166 710
384 616
414 205
Attributable to the equity holders of the parent
Issued
capital
US$’000
Share
premium
US$’000
Other
reserves1
US$’000
Accumu-
lated
(losses)/
retained
earnings
US$’000
Non-
controlling
interests
US$’000
Total
US$’000
Total
equity
US$’000
Balance at 1 January 2021
1 397
885 648
(212 164)
(511 808)
163 073
84 422
247 495
Total comprehensive (loss)/
income
Profit for the year
Other comprehensive loss
Share capital issued (Note 16)
Share-based payments (Note 27)
Dividends declared (Note 29)
–
–
–
9
–
–
–
–
–
–
–
–
(14 921)
14 767
(154)
6 311
6 157
–
(14 921)
(9)
397
–
14 767
–
–
–
(3 509)
14 767
(14 921)
–
397
(3 509)
12 586
(6 275)
–
–
(3 890)
27 353
(21 196)
–
397
(7 399)
Balance at 31 December 2021
1 406
885 648
(226 697)
(500 550)
159 807
86 843
246 650
Attributable to discontinued operation
(Note 15)
–
–
(52 893)
(196 006)
(248 899)
–
(248 899)
Balance at 1 January 2020
1 391
885 648
(202 857)
(525 449)
158 733
85 424
244 157
Total comprehensive (loss)/income
Profit for the year
Other comprehensive loss
Share capital issued (Note 16)
Share-based payments (Note 27)
Dividends declared
–
–
–
6
–
–
–
–
–
–
–
–
(9 862)
13 641
3 779
6 450
10 229
–
(9 862)
13 641
–
13 641
(9 862)
(6)
561
–
–
–
–
–
561
–
10 637
(4 187)
–
–
(7 452)
24 278
(14 049)
–
561
(7 452)
Balance at 31 December 2020
1 397
885 648
(212 164)
(511 808)
163 073
84 422
247 495
Attributable to discontinued operation
(Note 15)
–
–
(53 046)
(192 252)
(245 298)
–
(245 298)
1 Other reserves relate to Foreign currency translation reserves and Share based equity reserves. Refer Note 16, Issued capital and reserves for further detail.
2021Gem Diamonds Limited Annual Report and AccountsPresenting the Gem Diamonds Annual Report and Accounts 2021 | Strategic report | Performance reviewGovernance | Directors’ report | Financial statements | Report on payments to governments | Additional information 156
157
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2021
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
Notes
23.1
23.2
18, 23.3
20
20
8
8
18
23.3
Cash flows from operating activities
Cash generated by operations
Working capital adjustments
Interest received
Interest paid
Income tax paid
Income tax received
Cash flows used in investing activities
Purchase of property, plant and equipment
Waste stripping costs capitalised
Proceeds from sale of property, plant and equipment
Cash flows used in financing activities
Lease liabilities repaid
Net financial liabilities repaid
Financial liabilities repaid
Financial liabilities raised
Dividends paid to holders of the parent
Dividends paid to non-controlling interests
Net (decrease)/ increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Foreign exchange differences
Cash and cash equivalents at end of year
Cash and cash equivalents at end of year – continuing operation
Cash and cash equivalents at end of year – discontinued operation
14
15
2021
US$’000
2020
US$’000
71 307
96 227
103 902
(7 107)
202
(2 457)
(23 329)
96
93 050
464
382
(3 558)
(1 268)1
7 1571
(68 686)
(48 718)
(3 985)
(64 725)
24
(1 571)
(47 167)
20
(19 025)
(12 995)
(1 660)
(7 194)
(26 393)
19 199
(3 486)
(6 685)
(16 404)
49 827
(2 366)
31 057
30 913
144
(1 906)
(6 431)
(55 638)
49 207
–
(4 658)
34 514
11 443
3 870
49 827
49 820
7
1 These amounts were presented on a net basis in the prior year and have been disaggregated and presented separately in the current year. This reclassification had no impact on the
financial statements.
1. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1.1 Corporate information
1.1.1
Incorporation
The holding company, Gem Diamonds Limited (the Company), was incorporated on 29 July 2005 in the British Virgin Islands (BVI)
and is domiciled in the United Kingdom (UK). The Company’s registration number is 669758.
These financial statements were authorised for issue by the Board on 16 March 2022.
The Group is principally engaged in operating diamond mines.
1.1.2 Operational information
The Company has the following investments directly and indirectly in subsidiaries at 31 December 2021. During the prior year
Gem Equity Group Limited, a 100% held dormant investment holding company, was abandoned. Following the sale of its
investments within the prior year the Board of Directors of Gem Equity Group Limited resolved to voluntarily liquidate the company.
The liquidation was finalised on 2 July 2021 and the company no longer exists at year end. In addition, Calibrated Diamonds
Investment Holdings (Proprietary) Limited, a 100% held subsidiary of Gem Diamonds Investments Limited was deregistered during
the year after being dormant for several years.
Name and registered
address of company
Subsidiaries
Gem Diamond Technical
Services (Proprietary)
Limited2
Illovo Corner
24 Fricker Road
Illovo Boulevard
Johannesburg
South Africa
Letšeng Diamonds
(Proprietary) Limited2
Letšeng Diamonds House
Corner Kingsway and Old
School Roads
Maseru
Lesotho
Gem Diamonds Botswana
(Proprietary) Limited2,3
Suite 103, GIA Centre
Diamond Technology Park
Plot 67782, Block 8
Gaborone
Botswana
Gem Diamonds
Investments Limited2
Suite 1, 3rd Floor,
11–12 St. James Square,
London
SW1Y 4LB United Kingdom
Share-
holding
Cost of
investment¹
Country of
incorporation
Nature of business
100%
US$17
RSA
Technical, financial and management
consulting services.
70%
US$126 000 303
Lesotho
Diamond mining and holder of
mining rights.
100%
US$5 844 579
Botswana
Diamond mining; evaluation and
development; and holder of mining licences
and concessions.
100%
US$17 531 316
UK
Investment holding company holding
100% in each of Gem Diamonds Innovation
Solutions CY Limited, a company holding
intellectual property relating to development
of technology to innovate mining processes;
Baobab Technologies BV, a diamond analysis
and valuation facility in Belgium; and
Gem Diamonds Marketing Services BV, a
marketing company that sells the Group’s
diamonds on tender in Antwerp.
1 The cost of investment represents original cost of investments at acquisition dates.
2 No change in the shareholding since the prior year.
3 Gem Diamonds Botswana (Proprietary) Limited (Ghaghoo Diamond Mine), which is in the process of being sold, has been classified as a discontinued operation held for
sale since 30 June 2019 and disclosed separately (refer Note 15, Asset held for sale).
2021Gem Diamonds Limited Annual Report and AccountsPresenting the Gem Diamonds Annual Report and Accounts 2021 | Strategic report | Performance reviewGovernance | Directors’ report | Financial statements | Report on payments to governments | Additional information 158
159
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021 (CONTINUED)
1. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
1.1 Corporate information (continued)
1.1.3 Segment information
For management purposes, the Group is organised into geographical units as its risks and required rates of return are affected
predominantly by differences in the geographical regions of the mines and areas in which the Group operates or areas in which
operations are managed. The below measures of profit or loss, assets and liabilities are reviewed by the Chief Operating Decision-
Maker, i.e. Board of Directors. The main geographical regions and the type of products and services from which each reporting
segment derives its revenue from are:
•
•
•
•
Lesotho (diamond mining activities);
Belgium (sales, marketing and manufacturing of diamonds);
BVI, RSA, UK and Cyprus (technical and administrative services); and
Botswana (diamond mining activities), classified as discontinued operation held for sale since 30 June 2019.
Management monitors the operating results of the geographical units separately for the purpose of making decisions about
resource allocation and performance assessment.
Gem Diamonds Botswana (Proprietary) Limited (Ghaghoo Diamond Mine), which was classified as a discontinued operation held
for sale and disclosed separately from 2019, continues to be classified as such at year end as management remain committed to the
sales process. Refer Note 15, Asset held for sale.
During the prior year Gem Equity Group, a dormant investment holding company registered in the BVI, was abandoned. Following
the sale of its investments within the prior year the Board of Directors of Gem Equity Group resolved to voluntarily liquidate the
company. The company no longer exists as the liquidation was finalised on 2 July 2021 at a minimal liquidation professional fee
paid by Gem Diamonds Limited. There was no further impact on the Group’s results in the current year from the company. GEG was
classified as part of the BVI, RSA, UK and Cyprus segment. Calibrated Diamonds Investment Holdings (Proprietary) Limited (CDIH),
a 100% held subsidiary of Gem Diamonds Investments Limited was deregistered during the year after being dormant for several
years. There was no impact on the Group’s results in the current year from this company. CDIH was classified as part of the BVI, RSA,
UK and Cyprus segment.
Segment performance is evaluated based on operating profit or loss. Intersegment transactions are entered into under normal
arm’s length terms in a manner similar to transactions with third parties. Segment revenue, segment expenses and segment results
include transactions between segments. Those transactions are eliminated on consolidation.
Segment revenue is derived from mining activities, polished manufacturing margins, and diamond analysis and manufacturing
services.
1. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
1.1 Corporate information (continued)
1.1.3 Segment information (continued)
The following tables presents revenue from contracts with customers, profit/(loss) for the year, EBITDA and asset and liability
information from operations regarding the Group’s geographical segments:
Lesotho
US$’000
Belgium
US$’000
BVI, RSA
UK and
Cyprus1
US$’000
Total
Continuing
operations
US$’000
Discontinued
operation
US$’000
198 816
(198 581)
235
54 012
7 199
46 813
(105)
59 008
(2 395)
56 613
(14 661)
41 952
64 328
306 777
369 105
39 440
202 461
(837)
201 624
350
350
–
(4)
1 238
(1)
1 237
(178)
1 059
1 625
161
1 985
351
7 031
(7 031)
408 308
(206 449)
–
1 063
1 063
201 859
55 425
8 612
–
46 813
(286)
(9 835)
(1 346)
(11 181)
(723)
(11 904)
(8 584)
1 788
6 312
11 603
(395)
50 411
(3 742)
46 669
(15 562)
31 107
57 369
308 726
377 402
51 394
–
–
–
–
–
–
(2)
(3 533)
(221)
(3 754)
–
(3 754)
(2 047)
1 413
2 097
4 100
Total
US$’000
408 308
(206 449)
201 859
55 425
8 612
46 813
(397)
46 878
(3 963)
42 915
(15 562)
27 353
55 322
310 139
379 499
55 494
24 175
1561
(5 014)
20 722
144
20 866
3 952
(1 345)
64 725
67 332
304
7
–
–
7
6
32
–
–
32
22
3 991
(1 345)
64 725
67 371
–
–
–
–
3 991
(1 345)
64 725
67 371
332
22
354
Year ended 31 December 2021
Revenue from contracts with
customers
Total revenue
Intersegment
External customers
Depreciation and amortisation
– Depreciation and mining asset
amortisation
– Waste stripping cost amortisation
Share-based equity transactions
Segment operating profit/(loss)
Net finance costs
Profit/(loss) before tax
Income tax expense
Profit/(loss) for the year
EBITDA
Segment non-current assets
Segment assets
Segment liabilities
Other segment information
Net cash and short-term deposits2
Capital expenditure
– Property, plant and equipment
– Net movement in rehabilitation asset3
– Waste cost capitalised
Total capital expenditure
Average number of employees
employed under contracts of service
1 No revenue was generated in BVI and Cyprus.
2
Calculated as cash and short-term deposits less drawn down bank facilities (excluding the asset-based finance facility, insurance premium financing and credit underwriting
fees). Refer Note 17, Interest bearing loans and borrowings.
3 Non-cash movements in rehabilitation assets relating to changes in rehabilitation estimates for the Lesotho segment.
Included in revenue for the current year is revenue from two customers who individually contributed 10% or more to total revenue.
This revenue in total amounted to US$73.0 million arising from sales reported in the Belgium segment.
Segment non-current assets do not include deferred tax assets of US$5.1 million and financial instruments of US$1.3 million.
Included in the non-current assets BVI, RSA, UK and Cyprus segment disclosure are non-current assets located in the Company’s
country of domicile, the UK, of US$0.1 million.
Segment assets and liabilities do not include deferred tax assets and liabilities of US$5.1 million and US$82.5 million respectively.
Total revenue for the year is higher than that of the prior year mainly due to higher volume of carats sold of 109 697 (2020: 99 172).
An average sales price of US$1 835 (2020: US$1 908) was achieved.
2021Gem Diamonds Limited Annual Report and AccountsPresenting the Gem Diamonds Annual Report and Accounts 2021 | Strategic report | Performance reviewGovernance | Directors’ report | Financial statements | Report on payments to governments | Additional information 160
161
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021 (CONTINUED)
1. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
1.1 Corporate information (continued)
1.1.3 Segment information (continued)
1. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
1.2 Summary of significant accounting policies
1.2.1 Basis of preparation
Year ended 31 December 2020
Revenue from contracts with
customers
Total revenue
Intersegment
External customers
Depreciation and amortisation
– Depreciation and mining asset
amortisation
– Waste stripping cost amortisation
Share-based equity transactions
Segment operating profit/(loss)
Net finance costs
Profit/(loss) before tax
Income tax expense
Profit/(loss) for the year
EBITDA
Segment non-current assets
Segment assets
Segment liabilities
Other segment information
Net cash and short-term deposits2
Capital expenditure
– Property, plant and equipment
– Net movement in rehabilitation asset3
– Waste cost capitalised
Total capital expenditure
Average number of employees
employed under contracts of service
1 No revenue was generated in BVI and Cyprus.
186 801
(186 183)
618
50 636
189 825
(796)
189 029
391
7 216
43 420
157
49 061
(2 742)
46 319
(10 790)
35 529
59 038
318 611
396 040
63 733
391
–
6
1 354
(6)
1 348
(179)
1 169
1 748
504
1 694
Lesotho
US$’000
Belgium
US$’000
BVI, RSA
UK and
Cyprus1
US$’000
Total
Continuing
operations
US$’000
Discontinued
operation2
US$’000
Total
US$’000
382 623
(192 976)
189 647
52 490
9 070
43 420
561
39 602
(4 613)
34 989
(10 711)
5 997
(5 997)
–
1 463
1 463
–
392
(7 751)
(1 663)
(9 414)
258
382 623
(192 976)
189 647
52 490
9 070
43 420
555
42 664
(4 411)
38 253
(10 711)
–
–
–
–
–
–
6
(3 062)
(202)
(3 264)
–
(9 156)
27 542
(3 264)
24 278
(7 588)
53 198
(2 943)
50 255
2 710
6 597
321 825
404 331
496
13 719
77 948
40 311
877
(6 565)
34 623
1 535
(3 125)
47 167
45 577
323
7
–
–
7
6
29
–
–
29
21
1 571
(3 125)
47 167
45 613
1 533
3 528
4 224
323 358
407 859
82 172
7
–
–
–
–
34 630
1 571
(3 125)
47 167
45 613
350
31
381
2
3
Calculated as cash and short-term deposits less drawn down bank facilities (excluding the asset-based finance facility, insurance premium financing and rolling fees
capitalised to the Company’s US$30.0 million bank loan facility). Refer Note 17, Interest bearing loans and borrowings.
Non-cash movements in rehabilitation assets relating to changes in rehabilitation estimates for the Lesotho segment.
Included in annual revenue for the 2020 year is revenue from six customers who individually contributed 10% or more to total
revenue. This revenue in total amounted to US$66.9 million arising from sales reported in the Belgium segment.
Segment non-current assets do not include deferred tax assets of US$6.3 million and financial instruments of US$0.2 million.
Included in the non-current assets BVI, RSA, UK and Cyprus segment disclosure are non-current assets located in the Company’s
country of domicile, the UK, of US$0.3 million.
Segment assets and liabilities do not include deferred tax assets and liabilities of US$6.3 million and US$84.5 million respectively.
The financial statements of the Group have been prepared in accordance with International Financial Reporting Standards (IFRS), as
issued by the International Accounting Standards Board (IASB). These financial statements have been prepared under the historical
cost basis except for assets and liabilities measured at fair value. The accounting policies have been consistently applied except for
the adoption of the new standards and interpretations detailed on the following pages.
The functional currency of the Company and certain of its subsidiaries is US dollar, which is the currency of the primary economic
environment in which the entities operate. All amounts are presented in US dollar and rounded to the nearest thousand. The
financial results of subsidiaries whose functional and reporting currency is in currencies other than US dollar have been converted
into US dollar on the basis as set out in Note 1.2.16, Foreign currency translations.
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also
requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a
higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements,
are disclosed in Note 1.2.28, Critical accounting estimates and judgements.
Changes in accounting policies and disclosures
New and amended standards and interpretations
The Group applied for the first-time certain standards and amendments, which are effective for annual periods beginning on or
after 1 January 2021 (unless otherwise stated). The Group has not early adopted any other standard, interpretation or amendment
that has been issued but is not yet effective.
The nature and effect of these changes as a result of the adoption of these new pronouncements are described below. Other than
the changes described below, the accounting policies adopted are consistent with those of the previous financial year.
Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 – Interest rate benchmark reform Phase 2
The amendment addresses issues that might affect financial reporting when an existing interest rate benchmark is replaced with
an alternative benchmark interest rate. In the prior year, the Group and its funders commenced a comprehensive debt refinancing
programme of the Group’s facilities. The refinancing programme incorporates the consideration of any risk posed to the Group by
phase two of the IBOR reform, which was effective from 1 January 2021. The IBOR reform may potentially have an impact on the
South African JIBAR, and LIBOR linked interest-bearing loans and borrowings The interest-bearing loans and borrowings subject
to the South African JIBAR rate include the LSL215.0 million unsecured project debt facility between Letšeng Diamonds, Nedbank
Limited and the Export Credit Insurance Corporation (ECIC) and the ZAR300.0 million revolving credit facility between Letšeng
Diamonds and Nedbank Limited. The interest-bearing loans and borrowings subject to the US$ three-month LIBOR rate include the
US$30.0 million revolving credit facility between Gem Diamonds Limited, Nedbank Limited, Standard Bank of South Africa Limited
and Firstrand Bank Limited. Both the South African JIBAR and the LIBOR rates are yet to transition to alternative benchmark rates at
the reporting period end. Refer to Note 17, Interest- bearing loans and borrowings for more information regarding the maturities
and the related benchmark rates subject to the IBOR reform on these loans and/or borrowing facilities. At year end, it is not possible
to estimate the potential impact of the amendment as no alternative rates have been published by the regulatory bodies or
negotiated with the funders, however, in terms of the agreement, the LIBOR rate on the US$30.0 million revolving credit facility of
Gem Diamonds Limited will be replaced by 30 June 2022. The Group will continue to assess the impact of the interest rate benchmark
reform as the revised benchmark rates are published or negotiated with the funders. This assessment will include considerations on
how the practical expedients available within the amendments will impact the Group’s interest rate benchmarking.
2021Gem Diamonds Limited Annual Report and AccountsPresenting the Gem Diamonds Annual Report and Accounts 2021 | Strategic report | Performance reviewGovernance | Directors’ report | Financial statements | Report on payments to governments | Additional information 162
163
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021 (CONTINUED)
1. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
1.2 Summary of significant accounting policies (continued)
1.2.1 Basis of preparation (continued)
New standards issued but not yet effective
The new standards, amendments and improvements that are issued, but not yet effective, up to the date of issuance of the Group’s
consolidated financial statements are listed in the table below. These standards, amendments and improvements have not been
early adopted and it is expected that, where applicable, these standards, amendments and improvements will be adopted on each
respective effective date. The impact of the adoption of these standards cannot be reasonably assessed at this stage.
New standards,
amendments, and
improvements
IFRS 17
Description
Insurance contracts
Amendment to IFRS 16
Covid 19-Related Rent Concessions beyond 30 June 2021
Amendments to IAS 37
Onerous contracts – cost of fulfilling a contract
Amendments to IFRS 3
Reference to the Conceptual Framework
Amendments to IAS 16
Property, plant and equipment proceeds before intended use
Amendments to IAS 1
Classification of liabilities as current or non-current
Amendments to IAS 8
Definition of Accounting Estimates
Amendments to IAS 1
and IFRS Practice Statement 2
Disclosure of Accounting Policies
Effective date*
1 January 2023
1 April 2021
1 January 2022
1 January 2022
1 January 2022
1 January 2023
1 January 2023
1 January 2023
Amendments to IAS 12
Deferred Tax related Assets and Liabilities arising from a Single Transaction 1 January 2023
Amendments to IFRS 10 and
IAS 28
Sale or Contribution of Assets between an Investor and its Associate
or Joint Venture
Pending
Improvement IFRS 1
Subsidiary as a first-time adopter
1 January 2022
Improvement IFRS 9
Fees in the ’10 per cent’ test for derecognition of financial liabilities
1 January 2022
Improvement IAS 41
Agriculture – Taxation in fair value measurements
1 January 2022
* Annual periods beginning on or after.
Business environment and country risk
The Group’s operations are subject to country risk being the economic, political and social risks inherent in doing business in certain areas
of Africa, Europe and the United Kingdom. These risks include matters arising out of the policies of the government, economic conditions,
imposition of or changes to taxes and regulations, foreign exchange rate fluctuations and the enforceability of contract rights.
The consolidated financial information reflects management’s assessment of the impact of these business environments and country
risks on the operations and the financial position of the Group. The future business environment may differ from management’s
assessment.
1.2.2 Going concern
The Group’s business activities, together with the factors likely to affect its future development, performance and position have
been assessed by management. The financial position of the Group, its cash flows and liquidity position are presented in the Annual
Report and Accounts. In addition, Note 26, Financial risk management, includes the Group’s objectives, policies and processes for
managing its capital; its financial risk management objectives; details of its financial instruments; and its exposures to market risk,
credit risk and liquidity risk.
1. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
1.2 Summary of significant accounting policies (continued)
1.2.2 Going concern (continued)
The Group’s net cash at 31 December 2021 was US$20.9 million (31 December 2020: net cash US$34.6 million). Following the
successful refinancing of the Group’s facilities for a three-year period from 23 December 2021, the Group’s undrawn facilities
at 31 December 2021 amounted to US$74.3 million, resulting in strong liquidity (defined as net cash and undrawn facilities) of
US$95.2 million (31 December 2020: US$95.4 million). The Group’s Revolving Credit facilities, which total US$77.0 million when fully
unutilised, mature on 22 December 2024. The balance of US$6.3 million is a general banking facility with no set expiry date, but is
reviewed annually (Refer Note 17, Interest-bearing loans and borrowings). The uncertainty that exists around the ongoing impact
of COVID-19 on future cashflows was considered by performing sensitivities on diamond pricing and diamond production volumes
and continued strengthening of the US$ against the Lesotho Loti.
After making enquiries which include reviews of forecasts and budgets, timing of cash flows, borrowing facilities and sensitivity
analyses and considering the uncertainties described in this report either directly or by cross-reference, the Directors have a
reasonable expectation that the Group has adequate financial resources to continue in operational existence for the foreseeable
future. For this reason, they continue to adopt the going concern basis in preparing the Group Financial Statements.
These financial statements have been prepared on a going concern basis which assumes that the Group will be able to meet its
liabilities as they fall due for the foreseeable future.
1.2.3 Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company
as at 31 December 2021.
Subsidiaries
Subsidiaries are consolidated from the date of their acquisition, being the date on which the Group obtains control, and continue to
be consolidated until the date that such control ceases. An investor controls an investee when it is exposed, or has rights, to variable
returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. To
meet the definition of control in IFRS 10, all three of the following criteria must be met: (a) an investor has power over an investee;
(b) the investor has exposure, or rights, to variable returns from its involvement with the investee; and (c) the investor has the ability
to use its power over the investee to affect the amount of the investor’s returns. The financial statements of subsidiaries used in
the preparation of the consolidated financial statements are prepared for the same reporting year as the parent company and are
based on consistent accounting policies. All intragroup balances and transactions, including unrealised gains and losses arising
from them, are eliminated in full.
Non-controlling interests
Non-controlling interests represent the equity in a subsidiary not attributable, directly or indirectly, to the parent company and
is presented separately within equity in the consolidated statement of financial position, separately from equity attributable to
owners of the parent. Losses within a subsidiary are attributed to the non-controlling interest even if that results in a deficit balance.
1.2.4 Exploration and evaluation expenditure
Exploration and evaluation activity involves the search for mineral resources, the determination of technical feasibility and the
assessment of commercial viability of an identified resource. Exploration and evaluation activity includes:
acquisition of rights to explore;
researching and analysing historical exploration data;
•
•
• gathering exploration data through topographical, geochemical and geophysical studies;
•
• determining and examining the volume and grade of the resource;
surveying transportation and infrastructure requirements; and
•
conducting market and finance studies.
•
exploratory drilling, trenching and sampling;
Administration costs that are not directly attributable to a specific exploration area are charged to the statement of profit or loss.
Licence costs paid in connection with a right to explore in an existing exploration area are capitalised, as a component of property,
plant and equipment, and amortised over the term of the permit.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021 (CONTINUED)
1. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
1.2 Summary of significant accounting policies (continued)
1.2.4 Exploration and evaluation expenditure (continued)
Exploration and evaluation expenditure is capitalised as incurred. Capitalised exploration expenditure is recorded as a component
of property, plant and equipment, as an exploration and development asset, at cost less accumulated impairment charges. As the
asset is not available for use, it is not depreciated.
All capitalised exploration and evaluation expenditure is monitored for indications of impairment. Where a potential impairment
is indicated, assessments are performed for each area of interest in conjunction with the group of operating assets (representing a
cash-generating unit (CGU) to which the exploration is attributed. To the extent that exploration expenditure is not expected to be
recovered, it is charged to the statement of profit or loss. Exploration areas where reserves have been discovered, but require major
capital expenditure before production can begin, are continually evaluated to ensure that commercial quantities of reserves exist
or to ensure that additional exploration work is under way as planned.
Management is required to make certain estimates and judgements when determining whether the commercial viability of an
identified resource has been met and when determining whether indicators of impairment exist.
1.2.5 Development expenditure
When proved reserves are determined and development is sanctioned, capitalised exploration and evaluation expenditure is
reclassified from exploration phase to development phase. As the asset is not available for use, during the development phase,
it is not depreciated. On completion of the development phase, any capitalised exploration and evaluation expenditure already
capitalised to a development asset, together with the subsequent development expenditure, is reclassified within property, plant
and equipment to mining assets and depreciated on the basis as laid out in Note 1.2.6, Property, plant and equipment.
All development expenditure is monitored for indicators of impairment annually. Management is required to make certain estimates
and judgements when determining whether indicators of impairment exist.
1.2.6 Property, plant and equipment
Property, plant and equipment are recorded at cost less accumulated depreciation and accumulated impairment losses. Cost
includes expenditure that is directly attributable to the acquisition and construction of the items, to get the asset in its condition and
location for its intended use among others, professional fees, and for qualifying assets, borrowing costs capitalised in accordance
with the Group’s accounting policies.
Subsequent costs to replace a component of an item of property, plant and equipment that is accounted for separately, is capitalised
when the cost of the item can be measured reliably, with the carrying amount of the original component being written off. All
repairs and maintenance are charged to the statement of profit or loss during the financial period in which they are incurred.
Depreciation commences when an asset is available for use. Depreciation is charged so as to write off the depreciable amount
of the asset to its residual value over its estimated useful life, using a method that reflects the pattern in which the asset’s future
economic benefits are expected to be consumed by the Group.
Item
Mining assets
Decommissioning assets
Leasehold improvements
Plant and equipment
Other assets
Method
Straight line
Straight line
Straight line
Straight line
Straight line
Useful life1
Lesser of life of mine or period of mining lease
Lesser of life of mine or period of mining lease
Three to 15 years
Two to eight years
1
Certain asset classes are depreciated over the lesser of life of mine, or period of mining lease. Prior to 1 January 2020, the period of mining lease was shorter than the life of
mine. On 1 January 2020 a reassessment of assets’ useful lives was performed at Letšeng which resulted in a revision of assets’ useful lives being made from a remaining useful
life of five years (original period of mining lease) to 15 years (life of mine) due to the extension of the Letšeng mining lease. Furthermore, also within the prior year the useful life
of plant and equipment was reassessed from a useful life of 10 years to the remaining life of mine (15 years); and the useful life of vehicles, categorised within the “Other assets
category”, were reassessed from five years to eight years.
1. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
1.2 Summary of significant accounting policies (continued)
1.2.6 Property, plant and equipment (continued)
An item of property, plant and equipment and any significant part initially recognised is derecognised upon disposal (i.e., at the date
the recipient obtains control) or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on
derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is
included in the statement of profit or loss when the asset is derecognised.
The asset’s residual values, useful lives and methods of depreciation are reviewed annually. Changes in the expected residual values,
expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to
modify the depreciation period or method, as appropriate, and are treated as changes in accounting estimates, and adjusted for
prospectively, if appropriate.
Pre-production and in production stripping costs
Costs associated with removal of waste overburden are classified as stripping costs.
Stripping activities that are undertaken during the production phase of a surface mine may create two benefits, being either the
production of inventory or improved access to the ore to be mined in the future. Where the benefits are realised in the form
of inventory produced in the period, the production stripping costs are accounted for as part of the cost of producing those
inventories. Where production stripping costs are incurred and where the benefit is the creation of mining flexibility and improved
access to ore to be mined in the future, the costs are recognised as a non-current asset if:
(a)
future economic benefits (being improved access to the orebody) are probable;
(b)
the component of the orebody for which access will be improved can be accurately identified; and
(c)
the costs associated with the improved access can be reliably measured.
The non-current asset recognised is referred to as a ‘stripping activity asset’ and is separately disclosed in Note 8, Property, plant and
equipment. If all the criteria are not met, the production stripping costs are charged to the statement of profit or loss as operating
costs. The stripping activity asset is initially measured at cost, which is the accumulation of costs directly incurred to perform the
stripping activity that improves access to the identified component of ore, plus an allocation of directly attributable overhead costs.
If incidental operations are occurring at the same time as the production stripping activity, but are not necessary for the production
stripping activity to continue as planned, these costs are not included in the cost of the stripping activity asset. Given the deep
vertical nature of the pit, all stripping costs are capitalised on a cut/component basis for each cut in the mine planning process.
The stripping activity asset is subsequently amortised over the expected useful life of the identified component of the orebody that
became more accessible as a result of the stripping activity. The net book value of the stripping asset and future expected stripping
costs to be incurred for that component is depreciated using the units of production over the proven and probable reserves, in
order to match the total stripping costs of the cut to the economic benefits created by the cut. As a result, the stripping activity asset
is carried at cost less amortisation and any impairment losses. The future stripping costs of the cut/component and the expected
ore to be mined of that cut/component are recalculated annually in light of additional knowledge and changes in estimates.
Changes in the stripping ratio are accounted for prospectively as a change in estimate.
Management applies judgement to calculate and allocate the production stripping costs to inventory and/or the stripping activity
asset(s) as referred under Note 1.2.28, Critical accounting estimates and judgements.
Borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset that necessarily takes a
substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the asset. All other borrowing
costs are expensed in the period in which they occur. Borrowing costs consist of interest and other costs that an entity incurs in
connection with the borrowing of funds.
Three years; or lesser of life of mine or period of mining lease
1.2.7 Borrowing costs
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021 (CONTINUED)
1. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
1.2 Summary of significant accounting policies (continued)
1.2.8 Non-current assets held for sale and discontinued operations
1. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
1.2 Summary of significant accounting policies (continued)
1.2.10 Financial instruments
The Group classifies non-current assets and disposal groups as held for sale if their carrying amounts will be recovered principally
through a sale transaction rather than through continuing use. Such non-current assets and disposal groups classified as held for
sale are measured at the lower of their carrying amount and fair value less costs to sell. Costs to sell are the incremental costs directly
attributable to the sale, excluding the finance costs and income tax expense.
The criteria for held-for-sale classification is regarded as met only when the sale is highly probable, and the asset or disposal group
is available for immediate sale in its present condition. Actions required to complete the sale should indicate that it is unlikely that
significant changes to the sale will be made or that it will be withdrawn. Management must be committed to the sale expected
within one year from the date of the classification.
Property, plant and equipment and intangible assets are not depreciated or amortised once classified as held for sale.
Assets and liabilities classified as held for sale are presented separately as current items in the statement of financial position.
A disposal group qualifies as a discontinued operation if it is a component of an entity that either has been disposed of, or is
classified as held for sale, and:
(a)
(b)
(c)
represents a separate major line of business or geographical area of operations;
is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations; or
is a subsidiary acquired exclusively with a view to re-sale.
Discontinued operations are excluded from the results of continuing operations and are presented as a single amount as profit or
loss after tax from discontinued operations in the statement of profit or loss.
Additional disclosures are provided in Note 15, Assets held for sale. All other notes to the financial statements include amounts for
continuing operations, unless indicated otherwise.
1.2.9 Goodwill
Goodwill is initially measured at cost, being the excess of the aggregate of the acquisition date fair value of the consideration
transferred and the amount recognised for the non-controlling interest (and where the business combination is achieved in
stages, the acquisition date fair value of the acquirer’s previously held equity interest in the acquiree) over the fair value of the net
identifiable amounts of the assets acquired and the liabilities assumed in the business combination.
Assets acquired and liabilities assumed in transactions separate to the business combinations, such as the settlement of pre-
existing relationships or post-acquisition remuneration arrangements, are accounted for separately from the business combination
in accordance with their nature and applicable IFRS.
Identifiable intangible assets, meeting either the contractual legal or separability criterion are recognised separately from goodwill.
Contingent liabilities representing a present obligation are recognised if the acquisition date fair value can be measured reliably.
If the aggregate of the acquisition date fair value of the consideration transferred and the amount recognised for the non-controlling
interest (and where the business combination is achieved in stages, the acquisition date fair value of the acquirer’s previously held
equity interest in the acquiree) is lower than the fair value of the net identifiable amounts of the assets acquired and the liabilities
assumed in the business combination, the difference is recognised in profit and loss.
After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment
testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s CGUs (or groups
of CGUs) that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are
assigned to those units. Each unit or group of units to which goodwill is allocated shall represent the lowest level within the entity
at which the goodwill is monitored for internal management purposes, and shall not be larger than an operating segment before
aggregation.
Where goodwill forms part of a CGU and part of the operation within that unit is disposed of, the goodwill associated with the
operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the
operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the
portion of the CGU retained.
The Group shall only recognise a financial instrument when the Group becomes a party to the contractual provisions of the
instrument. A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity
instrument of another entity.
Financial assets
Management determines the classification of its financial assets at initial recognition and re-evaluates this designation at every
reporting date based on the business model for managing these financial assets and the contractual cash flow characteristics.
Currently the Group only has financial assets at amortised cost which consist of receivables and other assets, and cash and short-
term deposits which is held within a business model to collect contractual cash flows and for which the contractual cash flow
characteristics are solely payments of principal interest. When financial assets are recognised initially, they are measured at fair value
plus (in the case of financial assets not at fair value through profit or loss) directly attributable transaction costs. Purchases or sales
of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place
(regular way trades) are recognised on the trade date.
Financial assets at amortised cost
Financial assets at amortised cost are non-derivative financial assets with fixed or determinable payments that are not quoted in
an active market. They are included in current assets, except those with maturities greater than 12 months after the reporting date.
These are classified as non-current assets. Such assets are carried at amortised cost using the effective interest rate method, if the
time value of money is significant, less any allowance for impairment. Gains and losses are recognised in the statement of profit or
loss when the financial assets at amortised cost are derecognised or impaired, as well as through the amortisation process.
Derecognition
A financial asset is primarily derecognised when the rights to receive cash flows from the asset have expired or the Group has
transferred its rights to receive cash flows from the asset. Gains or losses from derecognition of financial assets are recognised in the
statement of profit or loss.
Financial liabilities
The Groups Interest-bearing loans and borrowings and trade and other payables financial liabilities are subsequently stated at
amortised cost using the effective interest rate method, with any difference between proceeds (net of transaction costs) and the
redemption value being recognised in the statement of profit or loss, unless capitalised in accordance with Note 1.2.7, Borrowing
costs, over the contractual period of the financial liability.
Derecognition
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. Gains or losses from
derecognition of financial liabilities are recognised in the statement of profit or loss.
1.2.11 Fair value measurement
The Group’s financial instruments or transactions that are classified to be measured at fair value on a recurring basis are measured at
fair value at each reporting date and financial instruments and transactions that are measured at fair value on a non-recurring basis
are measured at fair value at the reporting date for which fair value measurement is relevant.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset
or transfer the liability takes place either:
•
•
in the principal market for the asset or liability; or
in the absence of a principal market, in the most advantageous market for the asset or liability.
The principal or the most advantageous market must be accessible by the Group.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset
or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits
by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest
and best use.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021 (CONTINUED)
1. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
1.2 Summary of significant accounting policies (continued)
1.2.11 Fair value measurement (continued)
The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data is available to measure
fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. All assets and liabilities
for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as
follows, based on the lowest level input that is significant to the fair value measurement as a whole:
Level 1: Quoted (unadjusted) market prices in active markets for identical assets or liabilities.
Level 2: Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly
observable.
Level 3: Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.
For assets and liabilities that are recognised in the financial statements that are measured at fair value on a recurring and non-
recurring basis, the Group determines whether transfers have occurred between levels in the fair value hierarchy by reassessing
categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each
reporting period.
1.2.12 Impairments
Non-financial assets
The Group assesses, at each reporting date, whether there is an indication that an asset (or CGU) may be impaired in accordance
with IAS 36. Goodwill is assessed for impairment on an annual basis and when circumstances indicate that the carrying value
may be impaired. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable
amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. In assessing value in use,
the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset.
Non-financial assets that were previously impaired are reviewed for possible reversal of the impairment at each reporting date. A
previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s
recoverable amount since the last impairment loss was recognised. If that is the case, the carrying amount of the asset is increased
to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of
depreciation, had no impairment loss been recognised for the asset in prior years. Such a reversal is recognised in the statement
of profit or loss. After such a reversal the depreciation charge is adjusted in future periods to allocate the asset’s revised carrying
amount, less any residual value, on a systematic basis over its remaining useful life. Impairment losses relating to goodwill cannot
be reversed in future periods.
Financial assets
Financial assets carried at amortised cost
The Group recognises an allowance for expected credit losses (ECLs) for all financial assets at amortised costs in the statement of profit
or loss. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows
that the Group expects to receive, discounted at an approximation of the original effective interest rate. The expected cash flows will
include cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms.
For credit exposures for which there has not been a significant increase in credit risk since initial recognition, ECLs are provided
for credit losses that result from default events that are possible within the next 12-months (a 12-month ECL). For those credit
exposures for which there has been a significant increase in credit risk since initial recognition, a loss allowance is required for credit
losses expected over the remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL).
1.2.13 Inventories
Inventories, which include rough diamonds, ore stockpiles and consumables, are measured at the lower of cost and net realisable
value. The amount of any write-down of inventories to net realisable value and all losses, is recognised in the period the write-down
or loss occurs. Cost is determined as the average cost of production, using the weighted average method. Cost includes directly
attributable mining overheads, but excludes borrowing costs.
Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the
estimated costs to be incurred in marketing, selling and distribution.
1. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
1.2 Summary of significant accounting policies (continued)
1.2.14 Cash and cash equivalents
Cash and cash equivalents are carried in the statement of financial position at amortised cost. Cash and cash equivalents comprise
cash on hand, deposits held at call with banks, and other short-term, highly liquid investments with original maturities of three
months or less.
For the purpose of the consolidated statement of cash flows, cash and cash equivalents consist of cash and cash equivalents as
defined above, net of outstanding bank overdrafts.
1.2.15 Issued share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in
equity as a deduction from the proceeds.
1.2.16 Foreign currency translations
Presentation currency
The results and financial position of the Group’s subsidiaries which have a functional currency different from the Group’s presentation
currency are translated into the Group’s presentation currency as follows:
•
•
statement of financial position items are translated at the closing rate at the reporting date;
income and expenses for each statement of profit or loss are translated at average exchange rates (unless this average is not a
reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and
expenses are translated at the dates of the transactions); and
•
resulting exchange differences are recognised as a separate component of equity.
Details of the rates applied at the respective reporting dates and for the statement of profit or loss transactions are detailed in
Note 16, Issued capital and reserves.
Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains or losses resulting from the settlement of such transactions and from the translation at the
period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of
profit or loss. Non-monetary items that are measured in terms of cost in a foreign currency are translated using the exchange rates
as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the
exchange rates at the date when the fair value was determined. Monetary items for each statement of financial position presented
are translated at the closing rate at the reporting date.
1.2.17 Share-based payments
Employees (including Senior Executives) of the Group receive remuneration in the form of share-based payment transactions,
whereby employees render services as consideration for equity instruments (equity-settled transactions). In situations where some
or all of the goods or services received by the entity as consideration for equity instruments cannot be specifically identified, they
are measured as the difference between the fair value of the share-based payment and the fair value of any identifiable goods or
services received at the grant date.
Equity-settled transactions
The cost of equity-settled transactions with employees are measured by reference to the fair value of the equity instruments at
the date at which they are granted and is recognised as an expense over the vesting period, which ends on the date on which the
relevant employees become fully entitled to the award. Fair value is determined using an appropriate pricing model. In valuing
equity-settled transactions, no account is taken of any vesting conditions, other than conditions linked to the price of the shares of
the Company (market conditions).
On a cumulative basis, over the vesting period of an award, no expense is recognised for awards that do not ultimately vest, except
for awards where vesting is conditional upon a market condition, which are treated as vesting irrespective of whether or not the
market condition is satisfied, provided that all other performance conditions are satisfied.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021 (CONTINUED)
1. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
1.2 Summary of significant accounting policies (continued)
1.2.17 Share-based payments (continued)
1. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
1.2 Summary of significant accounting policies (continued)
1.2.20 Taxation
At each reporting date before vesting, the cumulative expense is calculated, representing the extent to which the vesting period
has expired and management’s best estimate of the achievement of the vesting conditions or otherwise of the non-market vesting
conditions and of the number of equity instruments that is expected to ultimately vest or, in the case of an instrument subject to
a market condition, be treated as vesting as described above. The movement in cumulative expense since the previous reporting
date is recognised in the statement of profit or loss, with a corresponding entry in equity.
Where the terms of an equity-settled award are modified, or a new award is designated as replacing a cancelled or settled award,
the cost based on the original award terms continues to be recognised over the original vesting period. In addition, an expense
is recognised over the remainder of the new vesting period for the incremental fair value of any modification, based on the
difference between the fair value of the original award and the fair value of the modified award, both as measured on the date
of the modification. No reduction is recognised if this difference is negative, due to the fact that it would not be beneficial to the
employees.
Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any cost not yet recognised
in the statement of profit or loss for the award is expensed immediately. Where an equity-settled award is forfeited, it is treated as
if vesting conditions had not been met and all costs previously recognised are reversed and recognised in income immediately
within the year of forfeiture.
Management applies judgement when determining whether share options relating to employees who resigned before the end of
the service condition period are cancelled or forfeited as referred under Note 1.2.28, Critical accounting estimates and judgements.
The Group periodically releases the share-based equity reserve to retained earnings in relation to lapsed, forfeited and exercised
options.
1.2.18 Provisions
Provisions are recognised when:
•
•
the Group has a present legal or constructive obligation as a result of a past event; and
a reliable estimate can be made of the obligation.
Provisions are measured at the present value of the expenditures expected to be required to settle the obligation, using a pre-tax
discount rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The
increase in the provision due to the passage of time is recognised as a finance cost.
1.2.19 Restoration and rehabilitation provision
The mining, extraction and processing activities of the Group normally give rise to obligations for site restoration and rehabilitation.
Rehabilitation works can include facility decommissioning and dismantling, removal and treatment of waste materials, land
rehabilitation, and site restoration. The extent of the work required and the estimated cost of final rehabilitation, comprising liabilities
for decommissioning and restoration, are based on current legal requirements, existing technology and the Group’s environmental
policies, and is reassessed annually. Cost estimates are not reduced by the potential proceeds from the sale of property, plant and
equipment.
Provisions for the cost of each restoration and rehabilitation programme are recognised at the time the environmental disturbance
occurs. When the extent of the disturbance increases over the life of the operation, the provision and associated asset is increased
accordingly. Costs included in the provision encompass all restoration and rehabilitation activity expected to occur. The restoration
and rehabilitation provisions are measured at the expected value of future cash flows, discounted to their present value, using a pre-
tax discount rate. Discount rates used are specific to the country in which the operation is located or reasonable alternatives if in-
country information is not available. The value of the provision is progressively increased over time as the effect of the discounting
unwinds, which is recognised in finance charges. Restoration and rehabilitation provisions are also adjusted for changes in estimates.
When provisions for restoration and rehabilitation are initially recognised, the corresponding cost is capitalised as a decommissioning
asset where it gives rise to a future benefit and depreciated over future production from the operation to which it relates.
Management is required to make significant estimates and assumptions when determining the amount of the restoration and
rehabilitation provisions as referred under Note 1.2.28, Critical accounting estimates and judgements.
Income tax for the period comprises current and deferred tax. Income tax is recognised in the statement of profit or loss except to
the extent that it relates to items charged or credited directly to equity or to other comprehensive income, in which case the tax
consequences are recognised directly in equity and other comprehensive income respectively. Current tax expense is the expected
tax payable on the taxable income for the period, using tax rates enacted or substantively enacted at the reporting date, and any
adjustment to tax payable in respect of previous years.
Deferred tax is provided using the statement of financial position liability method, providing for temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or
the liability is settled based on the tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the
asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be
realised.
The Group offsets deferred income tax assets and deferred income tax liabilities if, and only if, it has a legally enforceable right to
set off current tax assets and current tax liabilities and the deferred income tax assets and deferred income tax liabilities relate to
income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities which intend either
to settle current tax liabilities and assets on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future
period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered.
In respect of taxable temporary differences associated with investments in subsidiaries, associates and jointly controlled entities,
deferred tax is provided except where the timing of the reversal of the temporary differences can be controlled by the Group and it
is probable that the temporary differences will not reverse in the foreseeable future.
In respect of deductible temporary differences associated with investments in subsidiaries, associates and jointly controlled entities,
deferred tax assets are only recognised to the extent that it is probable that the temporary differences will reverse in the foreseeable
future and taxable profit will be available against which the temporary differences can be utilised. Withholding tax is recognised
in the statement of profit or loss when dividends or other services which give rise to that withholding tax are declared or accrued
respectively. Withholding tax is disclosed as part of current tax.
Royalties
Royalties incurred by the Group comprise mineral extraction costs based on a percentage of sales paid to the local revenue
authorities. These obligations arising from royalty arrangements are recognised as current payables and disclosed as part of royalty
and selling costs in the statement of profit or loss.
Royalties and revenue-based taxes are accounted for under IAS 12 when they have the characteristics of an income tax. This is
considered to be the case when they are imposed under government authority and the amount payable is based on taxable
income – rather than based on quantity produced or as a percentage of revenue. For such arrangements, current and deferred tax
is provided on the same basis as described above for other forms of taxation. The royalties incurred by the Group are considered not
to meet the criteria to be treated as part of income tax.
1.2.21 Employee benefits
Provision is made in the financial statements for all short-term employee benefits. Liabilities for wages and salaries, including non-
monetary benefits, benefits required by legislation, annual leave, retirement benefits and accumulating sick leave obliged to be
settled within 12 months of the reporting date, are recognised in trade and other payables and are measured at the amounts
expected to be paid when the liabilities are settled. Benefits falling due more than 12 months after the reporting date are measured
at the amount the obligation is expected to be settled or discounted to present value using a pre-tax discount rate where relevant
or where time value of money is expected to be significant. The Group recognises an expense for contributions to the defined
contribution pension fund in the period in which the employees render the related service.
Bonus plans
The Group recognises a liability and an expense for bonuses. The Group recognises a liability where contractually obliged or where
there is a past practice that has created a constructive obligation. These liabilities are recognised in trade and other payables and
are measured at the amounts expected to be paid when the liabilities are settled.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021 (CONTINUED)
1. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
1.2 Summary of significant accounting policies (continued)
1.2.22 Leases
1. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
1.2 Summary of significant accounting policies (continued)
1.2.23 Revenue from contracts with customers (continued)
At inception, the Group assesses whether a contract is or contains a lease. This assessment involves the exercise of judgement
whether it depends on a specified asset, whether the Group obtains substantially all the economic benefits from the use of that
asset, and whether the Group has the right to direct the use of the asset. For leases that contain one lease component and one or
more additional lease or non-lease components, the Group allocates the consideration in the contract to each lease and non-lease
component on the basis of the individual relative stand-alone price of all lease and non-lease components and the aggregate
stand-alone price of all lease and non-lease components. The lease component is accounted for under the requirements of IFRS 16
and the non-lease component is accounted for using the relevant IFRS standard based on the nature of the non-lease component.
Right-of-use assets
The Group recognises right-of-use assets at the commencement date of the lease (ie, the date the underlying asset is available
for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for
any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial
direct costs incurred, costs to dismantle, restore and remove the right-of-use asset, and lease payments made at or before the
commencement date less any lease incentives received. After the commencement date, the right-of-use assets are measured
using a cost model. Right-of-use assets are depreciated on a straight-line basis over the shorter of the lease term and the estimated
useful lives of the assets. If ownership of the leased asset transfers to the Group at the end of the lease term or the cost reflects the
exercise of a purchase option, depreciation is calculated using the estimated useful life of the asset. Right-of-use assets are subject
to impairment. Refer Note 1.2.12, Impairments.
Lease liabilities
At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease payments to
be made over the lease term. The lease payments include fixed payments (including in-substance fixed payments) less any lease
incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual
value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the
Group and payments of penalties for terminating a lease, if the lease term reflects the Group exercising the option to terminate. The
variable lease payments that do not depend on an index or a rate are recognised as an expense in the period on which the event
or condition that triggers the payment occurs.
In calculating the present value of lease payments, the Group uses the incremental borrowing rate at the lease commencement
date if the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities
is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease
liabilities is remeasured if there is a modification to the terms and conditions of the lease or if there is a lease reassessment.
Short-term leases and leases of low-value assets
The Group applies the short-term lease recognition exemption to its short-term leases (ie, those leases that have a lease term of
12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets
recognition exemption to leases of office equipment that are considered to be qualitatively and quantitatively of low value. Lease
payments on short-term leases and leases of low-value assets are recognised as expense on a straight-line basis over the lease term.
Group as a lessor
Where the Group is a lessor, it determines at inception whether the lease is a finance or operating lease. When a lease transfers
substantially all the risks and rewards of ownership of the underlying asset then the lease is a finance lease; otherwise the lease is
an operating lease.
Where the Group is an intermediate lessor, the interest in the head lease and the sub-lease is accounted for separately and the lease
classification of a sub-lease is determined by reference to the Right-of-use-asset arising from the head lease. Income from operating
leases is recognised on a straight-line basis over the lease term.
1.2.23 Revenue from contracts with customers
Revenue comprises net invoiced diamond sales to customers excluding VAT. Diamond sales are made through a competitive tender
process and recognised when the Group’s performance obligations have been satisfied at the time the buyer obtains control of the
diamond(s), at an amount that the Group expects to be entitled in exchange for the diamond(s). Where the Group makes rough
diamond sales to customers and retains a right to an interest in their future sale as polished diamonds, the Group records the sale of
the rough diamonds but such contingent revenue on the onward sale is only recognised at the date when the polished diamonds
are sold or when polished sales prices are mutually agreed between the customer and the Group.
The following revenue streams are recognised:
•
rough diamonds which are sold through a competitive tender process, partnership agreements and joint operation
arrangements;
• polished diamonds and other products which are sold through direct sales channels;
•
•
additional uplift (on the value from rough to polished) on partnership arrangements; and
additional uplift (on the value from rough to polished) on joint operation arrangements.
The sale of rough diamonds is the core business of the Group, with other revenue streams contributing marginally to total revenue.
Revenue through joint operation arrangements is recognised for the sale of the rough diamond according to each party’s
percentage entitlement as per the joint operation arrangement. Contractual agreements are entered into between the Group
and the joint operation partner whereby both parties control jointly the cutting and polishing activities relating to the diamond.
All decisions pertaining to the cutting and polishing of the diamonds require unanimous consent from both parties. Once these
activities are complete, the polished diamond is sold, after which the revenue on the remaining percentage of the rough diamond
is recognised, together with additional uplift on the joint operation arrangement. The Group portion of inventories related to these
transactions is included in the total inventories balance.
Revenue through partnership arrangements is recognised for the sale of the rough diamond, with an additional uplift based on
the polished margin achieved. Management recognises the revenue on the sale of the rough diamond when it is sold to a third
party, as there is no continuing involvement by management in the cutting and polishing process and control has passed to the
third party. Revenue from additional uplift is considered to be a variable consideration. This variable consideration will generally
be significantly constrained. This is on the basis that the ultimate additional uplift received will depend on a range of factors that
are highly susceptible to factors outside the Group’s influence. Management recognises revenue on the additional uplift when the
polished diamond is sold by the third party or the polished sales prices are mutually agreed between the third party and the Group
and the additional uplift is guaranteed, as this is the point in time at which the significant constraints are lifted or resolved from the
Polished Margin revenue.
Rendering of service
Revenue from services relating to third-party diamond manufacturing is recognised in the accounting period in which the services
are rendered, when the Group’s performance obligations have been satisfied, at an amount that the Group expects to be entitled
to in exchange for the services.
Contract assets
A contract asset is the right to consideration in exchange for goods or services transferred to the customer. If the Group transfers
goods or services to a customer before the customer pays consideration or before payment is due, a contract asset is recognised
for the earned consideration that is conditional. The Group does not have any contract assets as performance and a right to
consideration occurs within a short period of time and all rights to consideration are unconditional.
Contract liabilities
A contract liability is the obligation to transfer goods or services to a customer for which the Group has received consideration
(or an amount of consideration is due) from the customer. If a customer pays consideration before the Group transfers goods or
services to the customer, a contract liability is recognised when the payment is made or the payment is due (whichever is earlier).
Contract liabilities are recognised as revenue when the Group performs under the contract. The Group does not have any contract
liabilities as the transfer of goods or services occurs within a short period of time of receiving the consideration.
1.2.24 Interest income
Interest income is recognised on a time proportion basis using the effective interest rate method.
1.2.25 Dividend income
Dividend income is recognised when the amount of the dividend can be reliably measured and the Group’s right to receive
payment is established.
1.2.26 Finance costs
Finance costs are recognised on a time proportion basis using the effective interest rate method.
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175
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021 (CONTINUED)
1. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
1.2 Summary of significant accounting policies (continued)
1.2.27 Dividend distribution
Dividend distributions to the Group’s shareholders are recognised as a liability in the Group’s financial statements in the period in
which the dividends are approved by the Group’s shareholders.
1.2.28 Critical accounting estimates and judgements
The preparation of the consolidated financial statements requires management to make estimates and judgements and form
assumptions that affect the reported amounts of the assets and liabilities, the reported income and expenses during the periods
presented therein, and the disclosure of contingent liabilities at the date of the financial statements. Estimates and judgements are
continually evaluated and are based on historical experience and other factors, including expectations of future events that are
believed to be reasonable under the circumstances.
The Group makes estimates and assumptions concerning the future and the resulting accounting estimates will, by definition,
seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment
to the financial results or the financial position reported in future periods are discussed below.
COVID-19
The Group has considered the impact of COVID-19 on its significant accounting judgements and estimates. The Group’s main
source of estimation uncertainty is in relation to assumptions used for the assessment of impairment and impairment reversal of
assets. No further significant estimates have been identified as a result of COVID-19, although the pandemic has increased the level
of uncertainty inherent in all future cash flow forecasts.
Task Force on Climate-related Financial Disclosures (TCFD)
In preparing the Consolidated Financial Statements management has considered the impact of climate change, particularly in the
context of the disclosures included in the Strategic Report this year detailing the phased approach strategy which the Group has
adopted in implementing the TCFD requirements and the high level overview of some climate-related risks and opportunities. These
considerations did not have a material impact on the financial reporting estimates and judgements, consistent with the assessment
that climate change is not expected to have a significant impact on the Group’s going concern assessment to March 2023 nor viability
over the next three years. These considerations also had no material impact on any Property, Plant and Equipment or Commitments.
For Letšeng, the physical risks identified of extreme weather conditions, are similar to its current operating conditions of drought,
high wind, extreme precipitation and cold events. The operation is therefore well set up to manage these conditions within its
current reporting and accounting framework. As users of grid-supplied and fossil fuel energy, our short-term focus is on improving
energy efficiencies in our operational processes and to reducing combustion related fossil fuel use. Due to the uncertainty of 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 going concern, viability assessment and impairment review.
Estimates
Ore reserves and associated life of mine (LoM)
There are numerous uncertainties inherent in estimating ore reserves and the associated LoM. Therefore, the Group must make
a number of assumptions in making those estimations, including assumptions as to the prices of diamonds, exchange rates,
production costs and recovery rates. Assumptions that are valid at the time of estimation may change significantly when new
information becomes available. Changes in the forecast prices of diamonds, exchange rates, production costs or recovery rates may
change the economic status of ore reserves and may, ultimately, result in the ore reserves being restated. Where assumptions change
the LoM estimates, the associated depreciation rates, residual values, waste stripping and amortisation ratios, and environmental
provisions are reassessed to take into account the revised LoM estimate. Refer Note 8, Property, plant and equipment, Note 10,
Intangible assets and Note 21, Provisions.
Provision for restoration and rehabilitation
Significant estimates and assumptions are made in determining the amount of the restoration and rehabilitation provisions. These
deal with uncertainties such as changes to the legal and regulatory framework, magnitude of possible contamination, and the
timing, extent and costs of required restoration and rehabilitation activity. Refer Note 21, Provisions, for further detail.
1. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
1.2 Summary of significant accounting policies (continued)
1.2.28 Critical accounting estimates and judgements (continued)
Judgement
Impairment reviews
The Group determines if goodwill is impaired at least on an annual basis, while all other significant operations are tested for
impairment when there are potential indicators which may require impairment review. This requires an estimation of the recoverable
amount of the relevant CGU under review. Recoverable amount is the higher of fair value less costs to sell and value in use. While
conducting an impairment review of its assets using value-in-use impairment models, the Group exercises judgement in making
assumptions about future rough diamond prices, exchange rates, volumes of production, ore reserves and resources included in the
current LoM plans, production costs and macro-economic factors such as inflation and discount rates. Changes in estimates used
can result in significant changes to the consolidated statement of profit or loss and consolidated statement of financial position.
The results of the impairment testing performed did not indicate any impairments in the current year. Refer Note 11, Impairment
testing, for further estimates and judgements applied.
The key assumptions used in the recoverable amount calculations, determined on a value-in-use basis, are listed below:
Valuation basis
Discounted present value of future cash flows.
LoM and recoverable value of reserves and resources
Economically recoverable reserves and resources, carats recoverable and grades achievable are based on management’s
expectations of the availability of reserves and resources at mine sites and technical studies undertaken by in-house and third-party
specialists. Reserves remaining after the current LoM plan have not been included in determining the value in use of the operations.
The LoM of Letšeng is to 2037 (2020: 2034).
Cost and inflation rate
Operating costs for Letšeng are determined based on management’s experience and the use of contractors over a period of time
whose costs are fairly reasonably determinable. Mining and processing costs in the short to medium term have been based on the
agreements with the relevant contractors. In the longer term, management has applied local inflation rates of 5.0% (2020: 4.0% to 5.3%)
for operating costs in addition to a depth escalation factor for mining costs as a result of mining in deeper areas within both pits.
Capital costs in the short-term has been based on management’s capital programme after which a fixed percentage of operating
costs have been applied to determine the capital costs necessary to maintain current levels of operations.
Exchange rates
Exchange rates are estimated based on an assessment at current market fundamentals and long-term expectations. The US
dollar/Lesotho loti (LSL) exchange rate used was determined with reference to the closing rate at 31 December 2021 of LSL15.96
(31 December 2020: LSL14.69).
Diamond prices
The medium-term diamond prices used in the impairment test have been set with reference to recent prices achieved, recent
market trends and the Group’s medium-term forecast. Long-term diamond price escalation reflects the Group’s assessment of
market supply/demand fundamentals.
Discount rate
The discount rate of 11.5% for revenue (2020: 10.8%) and 13.4% for costs (2020: 14.3%) used for Letšeng represents the before-tax
risk-free rate adjusted for market risk, volatility and risks specific to the asset and its operating jurisdiction.
Market capitalisation
In the instance where the Group’s asset carrying values exceed market capitalisation, this results in an indicator of impairment.
The Group believes that this position does not represent an impairment as all significant operations were assessed for impairment
during the year and no impairments were recognised.
Sensitivity
The value in use for Letšeng indicated sufficient headroom, and the further changes to key assumptions which could result in
impairment are disclosed in Note 11, Impairment testing.
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176
177
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021 (CONTINUED)
1. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
1.2 Summary of significant accounting policies (continued)
1.2.28 Critical accounting estimates and judgements (continued)
Provision for restoration and rehabilitation and deferred tax thereon
Judgement is applied when calculating the closure costs associated with the restoration of the Letšeng mine site. These include
the following:
•
•
There are no costs associated with the backfill of the open pits due to no in-country legislation requirements; and
There are no costs associated with dismantling permanent buildings as these will be handed over to various parties in
consultation with the Lesotho Government when the end of life is reached.
Deferred tax assets are recognised on provisions for rehabilitation as management will ensure appropriate tax planning to ensure
sufficient taxable income is available to utilise all deductions in the future.
Capitalised stripping costs (deferred waste)
Waste removal costs (stripping costs) are incurred during the development and production phases at surface mining operations.
The orebody needs to be identified in its various separately identifiable components. An identifiable component is a specific
volume of the orebody that is made more accessible by the stripping activity. Judgement is required to identify and define these
components (referred to as ‘cuts’), and also to determine the expected volumes (tonnes) of waste to be stripped and ore to be
mined in each of these components. These assessments are based on a combination of information available in the mine plans,
specific characteristics of the orebody and the milestones relating to major capital investment decisions.
Judgements and estimates are also used to apply the amortisation rate, future stripping costs of the cut/component and the
expected ore to be mined of that cut/component. Refer Note 8, Property, plant and equipment.
Share-based payments
Judgement is applied by management in determining whether the share options relating to employees who resigned before the
end of the service condition period have been cancelled or forfeited in light of their leaving status. Where employees do not meet
the requirements of a good leaver as per the rules of the long-term incentive plan (LTIP), no award will vest and this will be treated
as cancellation by forfeiture. The expenses relating to these charges previously recognised are then reversed. Where employees
do meet the requirements of a good leaver as per the rules of the LTIP, some or all of an award will vest and this will be treated as
a modification to the original award. The future expenses relating to these awards are accelerated and recognised as an expense
immediately. Refer Note 27, Share-based payments, for further detail.
1. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
1.2 Summary of significant accounting policies (continued)
1.2.28 Critical accounting estimates and judgements (continued)
Identifying uncertainties over tax treatments
As disclosed in the prior year, an amended tax assessment was issued to Letšeng by the Lesotho Revenue Authority (LRA) in
December 2019, contradicting the application of certain tax treatments in the current Lesotho Income Tax Act 1993. An objection to
the amended tax assessment was lodged with the LRA in March 2020, which was supported by the opinion of senior counsel. The
LRA subsequently lodged a court application for the review and setting aside of the applicable regulations to the Lesotho High Court
pertaining to this matter, which Letšeng is opposing and a court date is expected to be set in June 2022.
On 7 February 2022, Letšeng received an application from the LRA to amend its original grounds for the court application. Letšeng’s
counsel continues to review the LRA’s proposed amendment and has opposed the new application by the LRA.
Management do not believe an uncertain tax position exists as:
• there is no ambiguity in the application of the published Lesotho Income Tax Act;
• there has been no change in the application of the Income Tax Act and resulting tax; and
• senior counsel advice, which is legally privileged, has been obtained for the new circumstances. This advice still reflects good
prospects of success.
No provision or contingent liability, relating to the amended tax assessment in question, is required to be raised in the 2021 Annual
Financial Statements.
Equipment and service lease
The major components of Letšeng’s ore-extraction mining activities are outsourced to a mining contractor. The mining contractor
performs these functions using their own equipment. Management applied judgement when evaluating whether the contract
between Letšeng and the mining contractor contained a lease. While it was concluded there was a lease, lease payments are
variable in nature as the lease payment vary based on the tonnes of ore and waste mined and hence no right of use asset or liability
could be measured. A portion of the lease payment is expensed in the consolidated statement of profit or loss and the portion
relating to waste removal/stripping costs is capitalised to the waste stripping asset in the proportions referred to under the estimate
and judgements applied to the Capitalised stripping costs (deferred waste) above. Refer Note 24, Commitments and contingencies.
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179
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021 (CONTINUED)
2.
REVENUE FROM CONTRACTS WITH CUSTOMERS
Sale of goods
Partnership arrangements
Rendering of services
The revenue from the sale of goods mainly represents the sale of rough diamonds, for which
revenue is recognised at the point in time at which control transfers.
The revenue from partnership arrangements of US$0.2 million represents the additional uplift
from partnership arrangements for which revenue is recognised when the significant constraints
are lifted or resolved and the amount of revenue is guaranteed (2020: US$0.6 million). At year end
894 carats (2020: 485 carats) have significant constraints in recognising revenue relating to the
additional uplift.
The revenue from the rendering of services mainly represents the sales of rough diamonds on
behalf of third parties, for which revenue is recognised at the time when performance obligations
are met, and services rendered on third-party diamond analysis and manufacturing, for which the
revenue is recognised over time as the services are rendered.
No revenue was generated from joint operation arrangements during the current or prior year
(2021: Nil) (2020: Nil).
3.
OTHER OPERATING (EXPENSES)/INCOME
Sundry income
Sundry expenses
Profit/(loss) on disposal and scrapping of property, plant and equipment
COVID-19 costs/standing costs
COVID-19 standing costs
During the prior year, COVID-19 standing costs consisted of US$2.9 million which related to
certain standing fixed mining contract and ore stockpile movement costs which were incurred
during the brief period that the mine suspended operations in compliance with the Lesotho
lockdown order and was placed on care and maintenance, and were recognised as abnormal
costs and expensed immediately in the Consolidated Statement of Profit or Loss. The remaining
US$1.0 million related to costs incurred to implement protocols throughout the Group to address
the risk and curb the spread of COVID-19. In the current year, there were no abnormal standing
costs incurred. Costs of US$0.7 million were incurred relating to continued protocols for curbing
the spread of the virus.
2021
US$’000
2020
US$’000
201 610
235
14
189 028
618
1
201 859
189 647
4.
OPERATING PROFIT
Operating profit includes operating costs and income as listed below:
Depreciation and amortisation
Depreciation and amortisation excluding waste stripping costs
Depreciation of right-of-use assets
Waste stripping costs amortised
116
(12)
16
(711)
(591)
26
(23)
(30)
(3 884)
(3 911)
Inventories
Cost of inventories recognised as an expense
Foreign exchange
Foreign exchange gain/(loss)
Lease expenses not included in lease liability
Mine site property
Equipment and service lease
Contingent rental – Alluvial Ventures
Auditor’s remuneration – EY
Group financial statements
Statutory
Auditor’s remuneration – other audit firms
Statutory
Other non-audit fees – EY
Tax compliance
Tax services advisory and consultancy
Other services1
Other non-audit fees – other audit firms
Tax services advisory and consultancy
Employee benefits expense
Salaries and wages2
Underlying earnings before interest, tax, depreciation and mining asset
amortisation (underlying EBITDA) before discontinued operation
Underlying EBITDA is shown, as the Directors consider this measure to be a relevant guide to
the operational performance of the Group and excludes such non-operating costs and income
as listed below. The reconciliation from operating profit to underlying EBITDA is as follows:
Operating profit
Other operating (income)/expense3
Foreign exchange (gain)/loss
Share-based payments
Depreciation and amortisation (excluding waste stripping cost amortised)
Underlying EBITDA before discontinued operation
2021
US$’000
2020
US$’000
(6 927)
(1 685)
(46 813)
(55 425)
(7 027)
(2 043)
(43 420)
(52 490)
(113 737)
(105 524)
1 929
(880)
(170)
(8 462)
(6 483)
(69)
(7 280)
(5 190)
(15 115)
(12 539)
(238)
(190)
(428)
(20)
–
–
(41)
(41)
(45)
(296)
(176)
(472)
(17)
(5)
(13)
–
(18)
(15)
(17 767)
(18 781)
50 411
(120)
(1 929)
395
8 612
57 369
42 664
27
880
555
9 070
53 196
1
2
Includes services related to forensic investigation performed on allegations of diesel theft at Letšeng.
Includes contributions to defined contribution plan of US$0.6 million (31 December 2020: US$0.5 million). An average of 354 employees excluding contractors were employed
during the period (2020: 381).
3 Excludes COVID-19 costs/standing costs which are considered as operating costs.
2021Gem Diamonds Limited Annual Report and AccountsPresenting the Gem Diamonds Annual Report and Accounts 2021 | Strategic report | Performance reviewGovernance | Directors’ report | Financial statements | Report on payments to governments | Additional information 180
181
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021 (CONTINUED)
5.
NET FINANCE COSTS
Finance income
Bank deposits
Other
Total finance income
Finance costs
Finance costs on borrowings
Finance costs on lease liabilities
Finance costs on unwinding of rehabilitation and decommissioning provision
Total finance costs
6.
INCOME TAX EXPENSE
Current
– Foreign
Withholding tax
– Foreign
Deferred
– Foreign
Income tax expense
Profit before taxation from continuing operations
Reconciliation of tax rate
Applicable income tax rate
Permanent differences
Unrecognised deferred tax assets
Effect of foreign tax at different rates
Withholding tax
Effective income tax rate
2021
US$’000
2020
US$’000
197
5
202
(2 232)
(525)
(1 187)
(3 944)
(3 742)
358
24
382
(3 297)
(608)
(888)
(4 793)
(4 411)
(10 197)
(11 593)
(639)
(529)
(4 726)
1 411
(15 562)
(10 711)
46 669
38 253
%
%
25.0
2.31
3.1
1.6
1.4
33.4
25.0
(3.0)
3.0
1.7
1.3
28.0
The tax rate reconciles to the statutory Lesotho corporation tax rate of 25.0% rather than the statutory UK corporation tax rate of
19.0% as this is the jurisdiction in which the majority of the Group’s taxes are incurred.
1 Permanent differences mainly comprise CSI at Letšeng Diamonds, legal fees of a capital nature and share-based payments, all of which are non-deductible for tax purposes.
7.
EARNINGS PER SHARE
The following reflects the income and share data used in the basic and diluted earnings per
share computations:
Profit for the year:
Continuing operations
Discontinued operation
Less: Non-controlling interests
Net profit attributable to ordinary equity holders of the parent for basic and
diluted earnings
Number of ordinary shares outstanding during the year (‘000)
Weighted number of share options exercised during the year (‘000)
2021
US$’000
2020
US$’000
27 353
31 107
(3 754)
24 278
27 542
(3 264)
(12 586)
(10 637)
14 767
13 641
140 516
(223)
139 612
(339)
Weighted average number of ordinary shares outstanding during the year (‘000)
140 293
139 273
Basic earnings per share attributable to ordinary equity holders of the parent (cents)
10.5
9.8
Earnings per share are calculated by dividing the net profit attributable to ordinary equity holders of the parent by the weighted
average number of ordinary shares outstanding during the year.
Diluted earnings per share are calculated by dividing the net profit attributable to ordinary equity holders of the parent by the
weighted average number of ordinary shares outstanding during the year after taking into account future potential conversion and
issue rights associated with the ordinary shares.
Weighted average number of ordinary shares outstanding during the year
Effect of dilution:
– Future share awards under the Employee Share Option Plan
2021
Number of
shares
2020
Number of
shares
140 293
139 273
1 796
2 341
Weighted average number of ordinary shares outstanding during the year adjusted for the
effect of dilution
142 089
141 614
Diluted earnings per share attributable to ordinary equity holders of the parent (cents)
10.4
9.6
There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date and the
date of completion of these financial statements.
2021Gem Diamonds Limited Annual Report and AccountsPresenting the Gem Diamonds Annual Report and Accounts 2021 | Strategic report | Performance reviewGovernance | Directors’ report | Financial statements | Report on payments to governments | Additional information 182
183
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021 (CONTINUED)
8.
PROPERTY, PLANT AND EQUIPMENT
8.
PROPERTY, PLANT AND EQUIPMENT (continued)
Stripping
activity
asset
US$’000
Mining
asset
US$’000
De-
commis-
sioning
assets
US$’000
Lease-
hold
improve-
ment
US$’000
Plant and
equipment
US$’000
Other
assets1
US$’000
Total
US$’000
587 355
64 725
115 050
–
4 119
–
55 955
36
79 468
3 850
7 601
105
849 548
68 716
(1 069)
–
–
(51 453)
–
–
–
(7 051)
–
–
–
(350)
(138)
(508)
473
(4 400)
(138)
(932)
(810)
(6 934)
–
(191)
337
(548)
(1 345)
(1 631)
–
(70 736)
Stripping
activity
asset
US$’000
Mining
asset
US$’000
De-
commis-
sioning
assets
US$’000
Lease-
hold
improve-
ment
US$’000
Plant and
equipment
US$’000
Other
assets1
US$’000
Total
US$’000
As at 31 December 2020
Cost
Balance at 1 January 2020
Additions
Net movement in rehabilitation
provision
Disposals
Scrapping2
Reclassifications
Foreign exchange differences
562 583
47 167
122 061
–
(990)
–
–
–
(21 405)
–
–
(2 929)
504
(4 586)
5 822
–
(1 373)
–
–
–
(330)
58 219
7
84 757
1 561
6 999
3
840 441
48 738
(381)
–
(610)
674
(1 954)
(381)
–
(993)
(1 751)
(3 725)
–
(85)
(444)
573
555
(3 125)
(85)
(4 976)
–
(31 445)
599 558
107 999
3 769
51 418
74 504
7 304
844 552
Balance at 31 December 2020
587 355
115 050
4 119
55 955
79 468
7 601
849 548
401 443
46 708
–
(33 445)
49 189
910
–
(5 225)
4 119
–
–
(350)
26 204
3 187
(508)
(2 235)
59 150
2 375
(929)
(5 052)
5 438
560
(187)
(427)
545 543
53 740
(1 624)
(46 734)
Accumulated depreciation/
amortisation/impairment
Balance at 1 January 2020
Charge for the year3
Disposals
Scrapping2
Foreign exchange differences
369 388
43 420
–
–
(11 365)
53 936
1 174
–
(2 929)
(2 992)
4 102
88
–
–
(71)
23 901
2 834
–
(567)
36
60 128
2 513
–
(987)
(2 504)
5 133
458
(41)
(488)
376
516 588
50 487
(41)
(4 971)
(16 520)
414 706
44 874
3 769
26 648
55 544
5 384
550 925
Balance at 31 December 2020
401 443
49 189
4 119
26 204
59 150
5 438
545 543
As at 31 December 2021
Cost
Balance at 1 January 2021
Additions
Net movement in rehabilitation
provision
Disposals
Reclassifications
Foreign exchange differences
Balance at
31 December 2021
Accumulated depreciation/
amortisation/impairment
Balance at 1 January 2021
Charge for the year
Disposals
Foreign exchange differences
Balance at
31 December 2021
Net book value at
31 December 2021
184 852
63 125
–
24 770
18 960
1 920
293 627
1 Other assets comprise motor vehicles, computer equipment, furniture and fittings, and office equipment.
Net book value at
31 December 2020
185 912
65 861
–
29 751
20 318
2 163
304 005
1 Other assets comprise motor vehicles, computer equipment, furniture and fittings, and office equipment.
2 Certain assets at Letšeng that were no longer in use were scrapped.
3 The 2020 reassessment of assets’ useful lives undertaken at Letšeng resulted in certain assets’ useful lives being realigned from the period of mining lease to the life of mine.
This resulted in a reduction in depreciation charge which will continue into the future. Refer Note 1.2.6, Property, plant and equipment.
2021Gem Diamonds Limited Annual Report and AccountsPresenting the Gem Diamonds Annual Report and Accounts 2021 | Strategic report | Performance reviewGovernance | Directors’ report | Financial statements | Report on payments to governments | Additional information 184
9.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021 (CONTINUED)
RIGHT-OF-USE ASSETS
As at 31 December 2021
Cost
Balance at 1 January 2021
Additions
Derecognition of lease
Foreign exchange differences
Balance at 31 December 2021
Accumulated depreciation
Balance at 1 January 2021
Charge for the year
Derecognition of lease
Foreign exchange differences
Balance at 31 December 2021
Net book value at 31 December 2021
As at 31 December 2020
Cost
Balance at 1 January 2020
Additions
Derecognition of lease
Foreign exchange differences
Balance at 31 December 2020
Accumulated depreciation
Balance at 1 January 2020
Charge for the year
Derecognition of lease
Foreign exchange differences
Balance at 31 December 2020
Net book value at 31 December 2020
Right-of-use assets
Plant and
equipment
US$’000
Motor
vehicles
US$’000
Buildings
US$’000
Total
US$’000
2 217
–
(2 141)
(20)
56
1 737
437
(2 141)
(13)
20
36
2 012
821
(585)
(31)
2 217
980
793
(115)
79
1 737
480
364
–
(260)
(10)
94
255
75
(260)
(7)
63
31
1 656
–
(1 019)
(273)
364
361
114
(175)
(45)
255
109
6 444
507
(768)
(422)
5 761
2 210
1 173
(523)
(169)
2 691
3 070
7 318
354
(988)
(240)
6 444
1 191
1 136
(196)
79
2 210
4 234
9 025
507
(3 169)
(452)
5 911
4 202
1 685
(2 924)
(189)
2 774
3 137
10 986
1 175
(2 592)
(544)
9 025
2 532
2 043
(486)
113
4 202
4 823
At year end, plant and equipment mainly comprise printing equipment utilised at Gem Diamond Technical Services. Motor vehicles mainly
comprise vehicles utilised by contractors at Letšeng. Buildings comprise office buildings in Maseru, Antwerp, London and Johannesburg.
Right-of-use assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term.
During the year, the lease contract for back-up power generating equipment and the lease for certain vehicles used on the mine at Letšeng
came to an end. The assets and liabilities associated with these leases have been derecognised. A new lease for back-up power generating
equipment is in the process of being negotiated. In the interim, Letšeng is renting existing back-up power generating equipment on a
month-to-month basis. Furthermore, Gem Diamonds Limited and Gem Diamonds Technical Services entered into new contracts for the
rental of office space in London and Johannesburg respectively. The new contracts were assessed as containing leases, which resulted in the
recognition of the new associated right-of-use assets and lease liabilities. The original contracts were both cancelled and all associated assets
and liabilities were derecognised.
In the prior year, Letšeng entered into a new contract with its existing ore processing contractor. The new contract was assessed as not
containing a lease as Letšeng no longer retained the right to control the use of the assets associated with the contract. The original contract,
which was assessed as containing a lease on adoption on 1 January 2019, was cancelled and all associated assets and liabilities were
derecognised. Furthermore, in the prior year, Gem Diamonds Limited entered into a new contract for the rental of its office space in London.
The new contract was assessed as containing a lease resulting in the recognition of the associated assets and liabilities. The original contract
was cancelled, and the associated assets and liabilities were derecognised.
185
9.
RIGHT-OF-USE ASSETS (continued)
Total gains of US$0.1 million (2020: US$0.2 million) relating to the derecognition of leases in the Group have been recognised in the
Consolidated Statement of Profit or Loss. Refer Note 18, Lease Liabilities and Note 23.1, Cash generated by operations. During the year the
Group recognised income of US$0.3 million (2020: US$0.3 million) from the sub-leasing of office buildings in Maseru. The Group expects to
receive the following lease payments from the operating sub-leasing in the following years:
2022
2023
2024
2025
US$ ‘000
358
381
405
245
10.
INTANGIBLE ASSETS
As at 31 December 2021
Cost
Balance at 1 January 2021
Foreign exchange difference
Scrapping
Balance at 31 December 2021
Accumulated amortisation
Balance at 1 January 2021
Amortisation
Scrapping
Balance at 31 December 2021
Net book value at 31 December 2021
As at 31 December 2020
Cost
Balance at 1 January 2020
Foreign exchange difference
Balance at 31 December 2020
Accumulated amortisation
Balance at 1 January 2020
Amortisation
Balance at 31 December 2020
Net book value at 31 December 2020
1 Goodwill allocated to Letšeng Diamonds. Refer Note 11, Impairment testing.
Intangibles
US$’000
Goodwill1
US$’000
Total
US$’000
791
–
(791)
12 997
(1 035)
–
13 788
(1 035)
(791)
–
11 962
11 962
791
–
(791)
–
–
791
–
791
791
–
791
–
–
–
–
–
791
–
(791)
–
11 962
11 962
13 653
(656)
12 997
–
–
–
14 444
(656)
13 788
791
–
791
12 997
12 997
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11.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021 (CONTINUED)
IMPAIRMENT TESTING
Impairment testing
Goodwill impairment testing is undertaken on Letšeng Diamonds annually and when there
are indications of impairment. The most recent test was undertaken at 31 December 2021. In
assessing whether goodwill has been impaired, the carrying amount of Letšeng Diamonds is
compared with its recoverable amount. For the purpose of goodwill impairment testing in 2021,
the recoverable amount for Letšeng Diamonds has been determined based on a value-in-use
model, similar to that adopted in the past.
Goodwill
Letšeng Diamonds
Balance at end of year
2021
US$’000
2020
US$’000
11 962
11 962
12 997
12 997
Movement in goodwill relates to foreign exchange translation from functional to presentation currency, as disclosed within
Note 10, Intangible assets.
The discount rate is outlined below and represents the nominal pre-tax rate. This rate is based on the weighted average cost
of capital (WACC) of the Group and adjusted accordingly at a risk premium for Letšeng Diamonds, taking into account risks
associated therein.
Discount rate – Letšeng Diamonds
Applied to revenue
Applied to costs
2021
%
11.5
13.4
2020
%
10.8
14.3
Value in use
Cash flows are projected for a period up to the date that the open pit mining is expected to cease in 2037 (in terms of IAS 36). This
is based on the latest available mine plan and is shorter than the mining lease period which extends to 2029 with an exclusive
option to renew for a further 10 years to 2039. This mine plan takes into account the available reserves and other relevant inputs
such as diamond pricing, costs and geotechnical parameters.
Sensitivity to changes in assumptions
The Group will continue to test its assets for impairment where indications are identified.
Refer Note 1.2.28, Critical accounting estimates and judgements, for further details on impairment testing policies.
The short and medium-term diamond prices used in the impairment test have been set with reference to recent prices achieved,
recent market trends and anticipated market supply and the Group’s medium-term forecast. Long-term diamond price escalation
reflects the Group’s assessment of market supply/demand fundamentals. The valuation of Letšeng at 31 December 2021 exceeded
the carrying value at an attributable level by US$35.1 million (31 December 2020: US$83.0 million). The valuation is sensitive to
input assumptions particularly in relation to the foreign exchange assumption of the US dollar (US$) to the Lesotho loti (LSL) and
the future price growth for diamonds. The Group has assumed an appropriate price increase for its diamonds following the market
improvement noted in the diamond prices during the year.
A range of alternative scenarios have been considered in determining whether there is a reasonably possible change in the
foreign exchange rates in conjunction with a reasonably possible change in the diamond price recovery, which would result in
the recoverable amount equating to the carrying amount. A 5% strengthening of the LSL to the US$ to US$1:LSL15.15 or a further
reduction of 4% to the starting diamond prices would result in the recoverable amount equating to the current carrying value (at
year end exchange rate), with other valuation assumptions remaining the same.
As a result, no impairment charge was recognised during the year.
187
2021
US$’000
2020
US$’000
109
1 169
1 278
25
975
19
122
2 954
4 095
2
–
–
–
23
25
153
–
153
22
1 349
–
135
4 180
5 686
–
22
–
–
–
22
12. RECEIVABLES AND OTHER ASSETS
Non-current
Deposits
Insurance Asset1
Current
Trade receivables
Prepayments2
Deposits
Other receivables
VAT receivable
The carrying amounts above approximate their fair value due to the nature of the instruments.
Analysis of trade receivables based on their terms and conditions
Neither past due nor impaired
Past due but not impaired:
Less than 30 days
30 to 60 days
60 to 90 days
90 to 120 days
1 During the year, the Group, through its subsidiary Letšeng, transitioned its conventional approach to insurance cover towards a more flexible approach, through retaining
higher insurance excesses, thereby obtaining an insurance premium saving and ultimately preserving cashflow. To mitigate the increased risk exposure of the higher
deductible in the unlikely event of an unexpected loss, Letšeng entered into a LSL100.0 million (US$6.2 million) Multi-aggregate Protection Insurance Policy with The Lesotho
National Insurance Group (LNIGC) on 1 October 2021. This policy has a tenure of 4 years and 9 months, consisting of five premium payments of LSL20.0 million
(US$1.3 million), each payable annually in advance (refer Note 24, Commitments and contingencies). This policy gives Letšeng the right to claim up to LSL50.0 million for
each-and-every-loss and LSL100.0 million in the aggregate (subject to terms and conditions contained in the policy), from inception of the policy. On expiry of the policy in
June 2026, all unutilised funds within the policy are due and payable to Letšeng. A non-current financial asset has been recognised for the unutilised premium paid to date,
net of underwriting and fronting fees as expensed within other operating expenses. The non-current financial asset is measured at amortised cost in line with IFRS 9. Interest
is earned on the unrealised premium and recognised as finance income. The first premium payment was financed through a 10-month loan through Premium Finance
Partners (Proprietary) Limited. This non-current financial asset is ceded in favour of Premium Finance Partners (Proprietary) Limited. Refer Note 17, Interest Bearing Loans
and Borrowings.
2 Prepayments include insurance premiums prepaid at Letšeng Diamonds of US$0.3 million (31 December 2020: US$0.6 million) and Gem Diamonds Technical Services of
US$0.2 million (31 December 2020: US$0.1 million) which were funded through Premium Finance Partners (Proprietary) Limited. This prepayment is ceded in favour of
Premium Finance Partners (Proprietary) Limited. Refer Note 17, Interest Bearing Loans and Borrowings.
Based on the nature of the Group’s client base and the negligible exposure to credit risk through its client base, insurance asset
and other financial assets, the expected credit loss is insignificant and has no impact on the Group.
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189
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021 (CONTINUED)
13.
INVENTORIES
Diamonds on hand
Ore stockpiles
Consumable stores
2021
US$’000
2020
US$’000
15.
18 303
4 702
8 153
31 158
15 558
2 365
8 818
26 741
Inventory is carried at the lower of cost or net realisable value. There were no write-downs recorded to net realisable value in the
current or prior year.
14.
CASH AND SHORT-TERM DEPOSITS
Cash on hand
Bank balances
Short-term bank deposit
2021
US$’000
2020
US$’000
3
27 673
3 237
30 913
4
35 456
14 360
49 820
The amounts reflected in the financial statements approximate fair value due to the short-term maturity and nature of cash and
short-term deposits.
Cash at banks earn interest at floating rates based on daily bank deposit rates. Short-term deposits are generally call deposit
accounts and earn interest at the respective short-term deposit rates.
The Group’s cash surpluses are deposited with major financial institutions of high-quality credit standing predominantly within
Lesotho and the United Kingdom.
At 31 December 2021, the Group had US$74.3 million (31 December 2020: US$60.8 million) of undrawn facilities, representing the
LSL750.0 million (US$47.0 million) three-year unsecured revolving working capital facility at Letšeng, the Letšeng ZAR100.0 million
(US$6.3 million) general banking facility and US$21.0 million from the Company’s unsecured revolving credit facility. For further
details on these facilities, refer Note 17, Interest-bearing loans and borrowings.
ASSETS HELD FOR SALE
Since 2019, in line with the strategic objective to dispose of non-core assets, the Board and Management have remained committed
to the sale of Gem Diamonds Botswana (Pty) Ltd (GDB), which owns the Ghaghoo diamond mine. Notwithstanding the lapsing
in the prior year during January 2020 of the initial sales agreement which was entered into in June 2019, management remained
committed and again opened the process to other prospective buyers and on 23 August 2021 entered into a binding share sale
agreement with Okwa Diamonds (Pty) Ltd (Okwa Diamonds), the entity with which an exclusivity agreement had been entered
into in November 2020. Okwa Diamonds, an SPV company registered in Botswana, which is owned by Vast Resources PLC (Vast),
a mining and resource development company listed on AIM (a sub-market of the London Stock Exchange), and by Botswana
Diamonds PLC (BOD), a diamond exploration and project development company listed on AIM and the Botswana Stock Exchange.
Vast and BOD are both parties to the share sale agreement and guarantee the obligations of Okwa Diamonds. Under the share sale
agreement, the purchaser would pay a total consideration of US$4.0 million, payable in two instalments of US$2.0 million each, the
first of which would be payable five days after the date on which the last suspensive condition is fulfilled or waived.
The suspensive conditions included obtaining the competition authority and regulatory approvals within Botswana. The competition
authority and regulatory conditions were fulfilled prior to year end and written approvals were obtained from the Botswana
Competition Authority and the Ministry of Mineral Resources, Green Technology and Energy Security of Botswana. The agreement
had an initial longstop date of 31 January 2022.
In January 2022, after the reporting period, Vast informed Gem Diamonds and BOD that it did not intend to continue with the
transaction due to its inability to meet the funding suspensive condition. BOD confirmed its commitment to conclude the
transaction as originally envisaged as soon as possible and has informed Gem Diamonds Limited that it has identified an alternative
financing partner which will, subject to any approvals that are required, replace Vast as the initial financing partner. Gem Diamonds
Limited and BOD remain committed to the sale of GDB and are working together towards a mutually beneficial outcome and have
agreed to extend the longstop date from 31 January 2022 to 31 March 2022.
As the transaction was not successfully concluded by year end, GDB continued to be disclosed as a discontinued operation held for
sale at year end based on the circumstances detailed above.
During the year, certain consumable inventory items which were not being used in the mine’s care and maintenance operations
were written off relating to expired explosives and plant consumables; underground mining consumables and spares and
accessories for automotives no longer on site. The asset held for sale is carried at carrying value which is lower than fair value less
costs to sell. The fair value is based on the unobservable market offer from the potential buyer for the disposal group, accordingly
the non-recurring fair value measurement is included in level 3 of the fair value hierarchy.
The trading results of the operation continue to be classified as a discontinued operation held for sale and are presented as follows:
Gross profit
Other costs
Inventory write-down
Share-based payments
Foreign exchange gain
Operating loss
Net finance costs
Loss before tax from discontinued operation
Income tax expense
Loss after tax from discontinued operation attributable to equity holders of the parent
Loss per share from discontinued operation (cents)
Basic
Diluted
2021
US$’000
2020
US$’000
–
(2 070)
(1 455)
(2)
(6)
(3 533)
(221)
(3 754)
–
(3 754)
(2.7)
(2.6)
–
(2 816)
(240)
(6)
–
(3 062)
(202)
(3 264)
–
(3 264)
(2.3)
(2.3)
Gem Diamonds Botswana incurred rental expenses from short-term leases of US$0.5 million (31 December 2020: US$0.9 million)
during the year.
2021Gem Diamonds Limited Annual Report and AccountsPresenting the Gem Diamonds Annual Report and Accounts 2021 | Strategic report | Performance reviewGovernance | Directors’ report | Financial statements | Report on payments to governments | Additional information 190
191
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021 (CONTINUED)
15.
ASSETS HELD FOR SALE (continued)
Gem Diamonds Botswana has estimated tax losses of US$173.0 million (31 December 2020: US$185.2 million), which carry no expiry
date, for which no deferred tax asset has been recognised. Deferred tax assets of US$0.3 million (31 December 2020: US$0.3 million)
were recognised to the extent of the deferred tax liabilities. These have been offset in the table below.
16.
ISSUED SHARE CAPITAL AND RESERVES (continued)
Other reserves
ASSETS
Non-current assets
Property, plant and equipment
Current assets
Inventories
Receivables and other assets
Cash and short-term deposits
Total assets
LIABILITIES
Non-current liabilities
Provisions
Current liabilities
Trade and other payables
Total liabilities
The net cash flows attributable to the discontinued operation held for sale are as follows:
Operating cash outflows
Investing
Financing cash inflows1
Foreign exchange loss on translation of cash balance
Net cash inflow/(outflow)
2021
US$’000
2020
US$’000
1 413
1 533
477
63
144
684
2 097
1 774
214
7
1 995
3 528
3 654
3 753
446
4 100
(2 186)
–
2 332
(9)
137
471
4 224
(2 920)
–
2 850
(63)
(133)
1 Financing provided by Gem Diamonds Botswana (Pty) Ltd’s holding company, being Gem Diamonds Limited, to fund care and maintenance costs.
16.
ISSUED SHARE CAPITAL AND RESERVES
Share capital
Authorised – ordinary shares of US$0.01 each
As at year end
Issued and fully paid balance at beginning of year
Allotments during the year
Balance at end of year
31 December 2021
31 December 2020
Number
of shares
’000
200 000
139 612
903
140 515
US$’000
2 000
1 397
9
1 406
Number
of shares
‘000
200 000
138 984
628
139 612
US$’000
2 000
1 391
6
1 397
Share premium
Share premium comprises the excess value recognised from the issue of ordinary shares above its par value.
Balance at 1 January 2021
Other comprehensive loss
Total comprehensive loss
Share capital issue
Share-based payments
Balance at 31 December 2021
Balance at 1 January 2020
Other comprehensive loss
Total comprehensive loss
Share capital issue
Share-based payments
Balance at 31 December 2020
Foreign
currency
translation
reserve
US$’000
(218 355)
(14 921)
(14 921)
–
–
Share-
based
equity
reserve
US$’000
6 191
–
–
(9)
397
Total
US$’000
(212 164)
(14 921)
(14 921)
(9)
397
(233 276)
6 579
(226 697)
(208 493)
(9 862)
(9 862)
–
–
5 636
–
–
(6)
561
(202 857)
(9 862)
(9 862)
(6)
561
(218 355)
6 191
(212 164)
Foreign currency translation reserve
The foreign currency translation reserve comprises all foreign exchange differences arising from the translation of foreign entities.
The South African, Lesotho and Botswana subsidiaries’ functional currencies are different to the Group’s presentation currency of
US dollar. The rates used to convert the operating functional currency into US dollar are as follows:
Average rate
Year end
Average rate
Year end
Currency
ZAR/LSL to US$1
ZAR/LSL to US$1
Pula to US$1
Pula to US$1
2021
14.79
15.96
11.09
11.76
2020
16.47
14.69
11.45
10.80
Share-based equity reserves
For details on the share-based equity reserve, refer Note 27, Share-based payments.
Capital management
For details on capital management, refer Note 26, Financial risk management.
17.
INTEREST-BEARING LOANS AND BORROWINGS
A consolidated Group-wide refinancing of revolving credit facilities (RCF) took place during the year with Nedbank Limited (acting
through its Nedbank Corporate and Investment Banking Division) (Nedbank) appointed as sole mandated lead arranger. Financial
close of the three-year RCF took place on 23 December 2021. The salient features of the new consolidated RCF are as follows:
•
•
Three funders are participating in the RCF, namely Nedbank (US$34.7 million), Standard Bank of South Africa Limited
(US$23.1 million) and Firstrand Bank Limited (through their various operations) (US$19.2 million). All draw downs will be made
in this same ratio;
The RCF of Gem Diamonds Limited remains unchanged at US$30.0 million and the Letšeng Diamonds RCF has increased from
LSL500.0 million (31 December 2020: US$34.0 million) to US$47.0 million, made up of two facilities of LSL450.0 million and
ZAR300.0 million;
• As at 31 December 2021, the RCF is unsecured;
2021Gem Diamonds Limited Annual Report and AccountsPresenting the Gem Diamonds Annual Report and Accounts 2021 | Strategic report | Performance reviewGovernance | Directors’ report | Financial statements | Report on payments to governments | Additional information 192
193
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021 (CONTINUED)
17.
INTEREST-BEARING LOANS AND BORROWINGS (continued)
• On 28 February 2022, subsequent to year end, Gem Diamonds Limited provided security for the RCF over its bank accounts
domiciled in the United Kingdom and on 15 March 2022 the security over its 70% shareholding in Letšeng Diamonds (carrying
value: US$256.2 million, which includes net cash and short-term deposits of US$24.2 million) was implemented. This security
has the impact of decreasing the interest rate margin on all facilities by 1.5% from 15 March 2022 and converting the facilities
into secured facilities;
•
•
The Nedbank Limited portions of the RCF, being US$13.5 million for Gem Diamonds Limited and ZAR300.0 million for
Letšeng Diamonds are Sustainability-linked loans, whereby the interest rate can be reduced if certain sustainability
performance targets to be measured on 31 December 2022 and 31 December 2023 are achieved. This has had no impact on the
classification or measurement of these facilities as at 31 December 2021;
The facilities also include an additional US$20.0 million accordion option for Gem Diamonds, the utilisation of which is subject to
all necessary internal credit and other approvals from all funders. There was no utilisation of this facility during the current year.
Effective interest rate
Maturity
2021
US$’000
2020
US$’000
Non-current
LSL215.0 million bank loan facility
Tranche A
Tranche B
ZAR12.8 million asset-based
finance facility
LSL450.0 million and
ZAR300.0 million bank loan facility
Credit underwriting fees
South African JIBAR + 6.50% 30 September 2022
31 March 2022
South African JIBAR + 3.15%
–
–
South African Prime Lending Rate
1 January 2024
202
– 22 December 2024
(525)
US$30.0 million bank loan facility
LIBOR + 6.50% 22 December 2024
London US$ three-month
Current
ZAR1.8 million insurance premium
finance
LSL14.5 million insurance premium
finance
2.5%
1 May 2021
2.95%
3 July 2021
US$30.0 million bank loan facility
London US$ three-month LIBOR + 5.0% 31 December 2021
8 663
8 340
–
–
–
LSL7.3 million insurance premium
finance
ZAR3.5 million insurance premium
finance
LSL20.0 million insurance premium
finance
LSL215.0 million bank loan facility
Tranche A
Tranche B
ZAR12.8 million asset-based
finance facility
2.35%
1 June 2022
305
2.5%
1 July 2022
155
3.2%
1 July 2022
South African JIBAR + 6.75% 30 September 2022
31 March 2022
South African JIBAR + 3.15%
880
439
752
South African Prime Lending Rate
1 January 2024
173
176
2 704
14 385
477
817
408
–
–
1 702
64
542
9 700
–
–
–
635
3 268
17.
INTEREST-BEARING LOANS AND BORROWINGS (continued)
LSL215.0 million (US$13.5 million) bank loan facility at Letšeng Diamonds
This loan comprises two tranches of debt as follows:
•
•
Tranche A: Lesotho loti denominated LSL35.0 million (US$2.2 million) term loan facility without Export Credit Insurance
Corporation (ECIC) support (five years and six months tenure); and
Tranche B: South African rand denominated ZAR180.0 million (US$11.3 million) debt facility supported by the ECIC (five years tenure).
The loan is an unsecured project debt facility which was signed jointly with Nedbank and the ECIC on 22 March 2017 to fund
the construction of the Letšeng mining support services complex. The loan is repayable in equal quarterly payments which
commenced in September 2018. At year end LSL19.0million (US$1.2 million) (31 December 2020: LSL76.3 million (US$5.2 million))
remains outstanding.
The South African rand-based interest rates for the facility at 31 December 2021 are:
•
•
Tranche A: 10.63% (31 December 2020: 10.10%); and
Tranche B: 7.03% (31 December 2020: 6.50%).
Total interest for the year on this interest-bearing loan was US$0.4 million (31 December 2020: US$0.6 million).
LSL450.0 million and ZAR 300.0 million (US$47.0 million) bank loan facility at Letšeng Diamonds
Following the consolidated refinancing on 23 December 2021, the Group, through its subsidiary Letšeng Diamonds, has a
LSL450.0 million and ZAR300.0 million (US$47.0 million) three-year revolving credit facility jointly with Nedbank Lesotho Limited,
Standard Lesotho Bank Limited, First National Bank of Lesotho Limited, Firstrand Bank Limited (acting through its Rand Merchant
Bank division) and Nedbank Limited (acting through its Nedbank Corporate and Investment Banking division).
The facility expires on 22 December 2024 and has a 24-month renewal option. The LSL450.0 million facility is subject to interest at
the Central Bank of Lesotho rate plus 4.75% and the ZAR300.0 million facility is subject to South African JIBAR plus 4.55%.
The facility was unsecured as at 31 December 2021, however, following the implementation of the security, subsequent to period
end, on 15 March 2022, the interest rate will decrease to Central Bank of Lesotho rate plus 3.25% and the ZAR300.0 million facility is
subject to South African JIBAR plus 3.05% respectively. There was no draw down on this facility at year end.
Credit underwriting fees of US$0.5 million (31 December 2020: US$ nil) which were incurred as part of the refinancing were
capitalised to the Group’s consolidated interest-bearing loans and borrowings, albeit that Letšeng did not have any draw downs
on its RCF at year end. The capitalised fees will be amortised and accounted for as finance costs within profit or loss over the
period of the facility. Arranging fees of US$0.2 million which were incurred as part of the refinancing were expensed to profit or
loss for the year.
US$30.0 million bank loan facility at Gem Diamonds Limited
This new facility is a three-year RCF with Nedbank Limited (acting through its London branch), Standard Bank of South Africa
Limited (acting through its Isle of Man branch) and Firstrand Bank Limited (acting through its Rand Merchant Bank division) for
US$13.5 million, US$9.0 million and US$7.5 million, respectively. All draw downs will be made in these ratios.
The facility expires on 22 December 2024 and has a 24-month renewal option.
The previous RCF of US$30.0 million with Nedbank Limited which was due to expire on 31 December 2021, was replaced with the
new RCF on 23 December 2021. On this date, the outstanding balance on the previous RCF was US$15.0 million and after a capital
repayment of US$6.0 million, the new RCF was recognised at US$9.0 million.
At year end US$9.0 million (31 December 2020: US$10.0 million) had been drawn down resulting in US$21.0 million (31 December
2020: US$20.0 million) remaining undrawn. Credit underwriting fees of US$0.3 million (31 December 2020: US$0.3 million facility
rolling fees) were capitalised to the loan balance, resulting in the disclosure of a net US$8.7 million (31 December 2020: US$9.7
million) loan balance. The capitalised fees will be amortised and accounted for as finance costs within profit or loss over the period
of the facility. Arranging fees of US$0.1 million which were incurred as part of the refinancing were expensed to profit or loss for
the year.
The US$-based interest rate for this facility at 31 December 2021 was 6.72% (31 December 2020: 5.22%) which comprises London
US$ three-month LIBOR plus 6.50%.
The facility was unsecured as at 31 December 2021, however, following the implementation of the security, subsequent to period
end, on 15 March 2022, the interest rate will decrease to London US$ three-month LIBOR plus 5.00%.
Total interest for the year on this interest-bearing RCF was US$1.0 million (31 December 2020: US$1.2 million).
2021Gem Diamonds Limited Annual Report and AccountsPresenting the Gem Diamonds Annual Report and Accounts 2021 | Strategic report | Performance reviewGovernance | Directors’ report | Financial statements | Report on payments to governments | Additional information 195
2021
US$’000
2020
US$’000
3 851
973
4 824
6 738
507
525
(2 185)
(352)
(409)
4 824
4 902
1 836
6 738
10 479
1 175
608
(2 522)
(2 296)
(706)
6 738
18.
LEASE LIABILITIES
Non-current
Current
Total lease liabilities
Reconciliation of movement in lease liabilities
As at 1 January
Additions
Interest expense
Lease payments
Derecognition of lease
Foreign exchange differences
As at 31 December
Lease payments comprise payments in principle of US$1.7 million (31 December 2020: US$1.9 million) and repayments of interest
US$0.5 million (31 December 2020: US$0.6 million).
The Group recognised variable lease payments of US$50.0 million (31 December 2020: US$41.4 million) for the year ended
31 December 2021 which consist of mining activities outsourced to a mining contractor. Total costs incurred for the year amount
to US$50.0 million (31 December 2020: US$41.4 million) of which US$41.5 million (31 December 2020: US$34.1 million) has been
capitalised to the Stripping Asset. Refer Note 1.2.6, Property Plant and equipment, Note 1.2.28, Critical accounting estimates and
judgements, Equipment and service lease, Note 4, Operating profit.
During the year, the lease relating to backup power generating equipment at Letšeng expired and was therefore derecognised. A
new lease for back-up power generating equipment is in the process of being negotiated. In the interim, Letšeng is renting existing
backup power generator equipment on a month-to-month basis, which amounted to US$0.4 million for the year which has been
included in profit or loss.
194
17.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021 (CONTINUED)
INTEREST-BEARING LOANS AND BORROWINGS (continued)
ZAR12.8 million (US$0.9 million) Asset-Based Finance facility
In January 2019, the Group, through its subsidiary, Gem Diamond Technical Services, entered into a ZAR12.8 million (US$0.9 million)
Asset Based Finance (ABF) facility with Nedbank Limited for the purchase of a mobile X-Ray transmission machine (the asset).
The asset serves as security for the facility and has a carrying value of ZAR2.5 million (US$0.2 million) as at 31 December 2021 (31 December
2020: ZAR4.9 million (US$0.3 million)). At year end ZAR6.0 million (US$0.4 million) remains outstanding (31 December 2020:
ZAR8.6 million (US$0.6 million)). The facility is repayable over five years and bears interest at the South African Prime Lending rate,
which was 7.25% at 31 December 2021 (31 December 2020: 7.0%).
Total interest for the year on this interest-bearing ABF was US$34 thousand (31 December 2020: US$0.1 million).
LSL7.3 million insurance premium finance
The Group through its subsidiary Letšeng Diamonds, entered into a LSL7.3million (US$0.5 million) 9-month funding agreement with
Premium Finance Partners (Proprietary) Limited for insurance premium finance for its annual Asset All Risk insurance premium. At
year end LSL4.9million (US$0.3million) remains outstanding. The funding is repayable in 9 monthly instalments, payable in advance.
Total interest on this funding is LSL0.2 million (US$11.6 thousand) of which LSL0.1 million (US$4.8 thousand) was paid during the
year. All respective insurance premiums prepaid at year end have been ceded in favour of Premium Finance Partners (Proprietary)
Limited. Refer Note 12, Receivables and other assets.
LSL14.5 million insurance premium finance
In the prior year, the Group through its subsidiary Letšeng Diamonds, entered into a LSL14.5million (US$1.0 million) 12-month
funding agreement with Premium Finance Partners (Proprietary) Limited for insurance premium finance for its annual Asset All Risk
insurance premium. In the prior year, all respective insurance premiums prepaid were ceded in favour of Premium Finance Partners
(Proprietary) Limited. Refer Note 12, Receivables and other assets. This financing was fully repaid on 3 July 2021.
LSL20.0 million insurance premium finance for Multi-aggregate Protection Insurance Policy
The Group through its subsidiary Letšeng Diamonds, entered into a LSL20.0 million (US$1.3 million) 10-month funding agreement
with Premium Finance Partners (Proprietary) Limited to finance the initial premium of LSL20.0 million on the Multi-aggregate Insurance
Policy. At year end LSL14.0 million (US$0.9 million) remains outstanding. The funding is repayable in 10 monthly instalments, payable in
advance. Total interest on this funding is LSL0.6 million (US$43.3 thousand) of which LSL0.2 million (US$15.1 thousand) was paid during
the year. The unutilised premium paid, recognised as an insurance asset, has been ceded as security in favour of Premium Finance
Partners (Proprietary) Limited. Refer Note 12, Receivables and other assets.
ZAR3.5 million insurance premium finance
The Group through its subsidiary Gem Diamonds Technical Services, entered into a ZAR3.5 million (US$0.2 million) 10-month
funding agreement with Premium Finance Partners (Proprietary) Limited for its annual Group Umbrella Liability insurance premium.
At year end ZAR2.5 million (US$154.9 thousand) remains outstanding. The funding is repayable in 10 monthly instalments. Total
interest on this funding is ZAR88.1 thousand (US$5.5 thousand) of which ZAR33.1 thousand (US$2.1 thousand) interest was paid
during the year. All respective insurance premiums prepaid at year end have been ceded in favour of Premium Finance Partners
(Proprietary) Limited. Refer Note 12, Receivables and other assets.
ZAR1.8 million insurance premium finance
In the prior year, the Group through its subsidiary Gem Diamonds Technical Services, entered into a ZAR1.8 million (US$0.1 million)
10-month funding agreement with Premium Finance Partners (Proprietary) Limited for its annual Group Umbrella Liability insurance
premium. In the prior year, all respective insurance premiums prepaid were ceded in favour of Premium Finance Partners (Proprietary)
Limited. Refer Note 12, Receivables and other assets. This financing was fully repaid on 1 May 2021.
Other facilities
In addition, Letšeng Diamonds has a ZAR100.0 million (US$6.3 million) general banking facility with Nedbank Limited (acting
through its Nedbank Corporate and Investment Banking division) renewable annually. There was no draw down on this facility at
year end.
2021Gem Diamonds Limited Annual Report and AccountsPresenting the Gem Diamonds Annual Report and Accounts 2021 | Strategic report | Performance reviewGovernance | Directors’ report | Financial statements | Report on payments to governments | Additional information 196
197
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021 (CONTINUED)
2021
US$’000
2020
US$’000
21.
19.
TRADE AND OTHER PAYABLES
Non-current
Severance pay benefits1
Current
Trade payables2
Accrued expenses2
Leave benefits
Royalties2
Withholding taxes2
Dividend payable to non-controlling interest
Other
2 095
2 029
10 778
5 413
639
4 996
341
–
21
22 188
12 892
8 169
685
3 2503
7053
3 064
58
28 823
1
The severance pay benefits arise due to legislation within the Lesotho jurisdiction, requiring that two weeks of severance pay be provided for every completed year of service,
payable on retirement.
2 These amounts are mainly non-interest bearing and are settled in accordance with terms agreed between the parties.
3 These amounts were presented on a net basis in the prior year and have been disaggregated and presented separately in the current year.
Royalties consist of a levy paid to the Government of the Kingdom of Lesotho on the value of diamonds sold by Letšeng.
Withholding taxes consist of taxes paid on dividends and other services to the Lesotho Revenue Authorities.
The carrying amounts above approximate fair value.
20.
INCOME TAX (RECEIVABLE)/PAYABLE
Reconciliation of movement in income tax payable
Balance at 1 January
Payments made during the year
Refunds received during the year
Income tax charge
Foreign exchange differences
Balance at 31 December
Split as follows
Income tax receivable
Income tax payable
1
These amounts were presented on a net basis in the prior year and have been disaggregated and presented separately in the
current year.
21.
PROVISIONS
Rehabilitation provisions
Reconciliation of movement in rehabilitation provisions
Balance at 1 January
Decrease during the year
Unwinding of discount rate
Foreign exchange differences
Balance at 31 December
2021
US$’000
2020
US$’000
11 834
(23 329)
96
10 197
11
(8 176)
(1 268)1
7 1571
11 593
2 528
(1 191)
11 834
(1 232)
41
(106)
11 940
11 202
12 331
12 331
(1 345)
1 187
(971)
11 202
15 588
(3 125)
888
(1 020)
12 331
Rehabilitation provisions
The provisions have been recognised as the Group has an obligation for rehabilitation of the mining areas. The provisions have
been calculated based on total estimated rehabilitation costs, discounted back to their present values over the LoM at the mining
operations. The pre-tax discount rates are adjusted annually and reflect current market assessments.
PROVISIONS (continued)
Rehabilitation provisions (continued)
In determining the amounts attributable to the rehabilitation provision at Letšeng, management used a discount rate of 9.8%
(31 December 2020: 9.7%), estimated rehabilitation timing of 14 years (31 December 2020: 15 years) and an inflation rate of 5.3%
(31 December 2020: 5.3%). At Ghaghoo (Refer Note 15, Asset held for sale), management used the available estimated costs to
rehabilitate, considering its care and maintenance state. The decrease in the provision at Letšeng is mainly attributable to the
annual reassessment of the estimated closure costs performed at the operations together with the ongoing rehabilitation spend
during the year at Letšeng.
22. DEFERRED TAXATION
Deferred tax assets
Lease liabilities
Accrued leave
Provisions
Deferred tax liabilities
Property, plant and equipment
Right-of-use assets
Prepayments
Unremitted earnings
Net deferred tax liability
Reconciliation of net deferred tax liability
Balance at beginning of year
Movement in current period:
– Accelerated depreciation for tax purposes
– Accrued leave
– Unremitted earnings
– Prepayments
– Provisions
– Lease liabilities
– Right-of-use assets
– Foreign exchange differences
Balance at end of year
2021
US$’000
2020
US$’000
1 225
321
3 571
5 117
(78 202)
(900)
(188)
(3 182)
1 683
263
4 400
6 346
(79 902)
(1 236)
(218)
(3 182)
(82 472)
(84 538)
(77 355)
(78 192)
(78 192)
(83 124)
(4 249)
(2)
–
30
(429)
(350)
273
5 564
548
21
857
29
12
(582)
527
3 520
(77 355)
(78 192)
The Group has not recognised a deferred tax liability for all taxable temporary differences associated with investments in
subsidiaries because it is able to control the timing of dividends and only part of the temporary difference is expected to reverse in
the foreseeable future. The gross temporary difference in respect of the undistributed reserves of the Group’s subsidiaries for which
a deferred tax liability has not been recognised is US$99.5 million (31 December 2020: US$97.1 million). There are no income tax
consequences attached to the payment of dividends by Gem Diamonds Limited to its shareholders.
The Group, excluding Ghaghoo, has estimated tax losses of US$40.3 million (31 December 2020: US$34.0 million). All tax losses are
generated in jurisdictions where tax losses do not expire. No deferred tax assets were recognised on these losses as management
do not foresee any taxable profits or taxable temporary differences against which to utilise these.
2021Gem Diamonds Limited Annual Report and AccountsPresenting the Gem Diamonds Annual Report and Accounts 2021 | Strategic report | Performance reviewGovernance | Directors’ report | Financial statements | Report on payments to governments | Additional information 198
199
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021 (CONTINUED)
Notes
2021
US$’000
2020
US$’000
2021
US$’000
2020
US$’000
CASH FLOW NOTES
23.
23.1 Cash generated by operations
Profit before tax for the year – continuing operations
Loss for the year – discontinued operation
Adjustments for:
Depreciation and amortisation excluding waste stripping
Depreciation on right-of-use assets
Waste stripping cost amortised
Finance income
Finance costs
Unrealised foreign exchange differences
(Profit)/loss on disposal and scrapping of property, plant and equipment
Gain on derecognition of leases
Inventory write down
Bonus, leave and severance provisions raised
Share-based payments
Gain on abandonment of investment
Bad debts written off
23.2 Working capital adjustment
(Increase)/decrease in inventory
Decrease in receivables
Decrease in payables
23.3 Cash flows from financing activities (excluding lease liabilities)
Balance at beginning of year
Net cash used in financing activities
– Financial liabilities repaid
– Financial liabilities raised
Interest paid
Non-cash movements
– Interest accrued
– Unwinding of facility rolling fees
– Financial liabilities raised1
– Foreign exchange differences
Balance at year end
4
4, 9
4
5
5, 15
15
46 669
(3 754)
6 927
1 685
46 813
(202)
4 165
(2 426)
(16)
(107)
1 455
2 284
397
–
12
103 902
(8 255)
5 072
(3 924)
(7 107)
16 087
(7 194)
(26 393)
19 199
(1 927)
4 078
1 927
300
2 082
(231)
38 253
(3 264)
7 027
2 043
43 420
(382)
4 994
(4 019)
30
(150)
240
4 317
561
(20)
–
93 050
3 489
1 316
(4 341)
464
22 341
(6 431)
(55 638)
49 207
(2 884)
3 061
2 884
–
1 047
(870)
17
11 044
16 087
1 This amount mainly relates to funding obtained for insurance premium finance. The funding was paid directly by the lender to the third party and is being repaid by the
Group in monthly instalments to the lender. Refer Note 17, Interest bearing loans and borrowings.
24.
COMMITMENTS AND CONTINGENCIES
Commitments
Mining leases
Mining lease commitments represent the Group’s future obligation arising from agreements
entered into with local authorities in the mining areas that the Group operates.
The period of these commitments is determined as the lesser of the term of the agreement,
including renewable periods, or the LoM. The estimated lease obligation regarding the future
lease period, accepting stable inflation and exchange rates, is as follows:
– Within one year
– After one year but not more than five years
– More than five years
Equipment and service lease
The Group has entered into lease arrangements for the provision of loading, hauling and
other transportation services payable at a fixed rate per tonne of ore and waste mined;
power generator equipment payable based on a consumption basis; and rental agreements
for various mining equipment based on the fleet utilised. All lease payments relating to this
lease are variable in nature. A portion of the lease payment is therefore expensed in the
Consolidated statement of profit or loss and the portion relating to waste removal/stripping
costs is capitalised to the waste stripping asset in the proportions referred to under the estimate
and judgements applied to the Capitalised stripping costs (deferred waste). Refer Note 1.2.28,
Critical accounting estimates. The terms of this lease are negotiated during the extension option
periods catered for in the agreements or at any time sooner if agreed by both parties.
– Within one year
– After one year but not more than five years
145
760
784
162
695
993
1 689
1 850
39 290
89 241
52 855
181 904
128 531
234 759
2021Gem Diamonds Limited Annual Report and AccountsPresenting the Gem Diamonds Annual Report and Accounts 2021 | Strategic report | Performance reviewGovernance | Directors’ report | Financial statements | Report on payments to governments | Additional information 200
24.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021 (CONTINUED)
COMMITMENTS AND CONTINGENCIES (continued)
Multi-aggregate protection policy
The Group, through its subsidiary Letšeng entered into a LSL100.0 million (US$6.2 million)
Multi-aggregate Protection Insurance Policy with the Lesotho National Insurance Group
(LNIGC) on 1 October 2021. This policy has a tenure of 4 years and 9 months, consisting of
five premium payments of LSL20.0 million (US$1.3 million), each payable annually in advance.
As at 31 December 2021 the Group has committed to making the four remaining premium
payments, as well as the annual insurance risk finance service fee of 7% on an annual premium of
LSL1.4 million (US$0.1 million) and the surplus reserve finance cost fee of 1.5% on the cumulative
net premiums surplus balance carried over each year. These fees are either deductible from
premium or payable upfront at the option of Letšeng. The Group has elected to deduct the fees
from the annual premiums, therefore no additional cash commitment relating to these fees and
the future cash flow commitments are stated at the future premiums payable over the remaining
insurance period. Refer Note 12, Receivables and other assets for further detail on the policy.
– Within one year
– After one year but not more than five years
Letšeng Diamonds Educational Fund
In terms of the mining agreement entered into between the Group and the Government of
the Kingdom of Lesotho, the Group has an obligation to provide funding for education and
training scholarships. The quantum of such funding is at the discretion of the Letšeng Diamonds
Education Fund Committee.
– Within one year
– After one year but not more than five years
Capital expenditure
Approved but not contracted for
Approved and contracted for
2021
US$’000
2020
US$’000
1 253
3 759
5 012
–
–
–
54
64
118
19 335
855
20 190
37
50
87
1 091
372
1 463
201
24.
COMMITMENTS AND CONTINGENCIES (continued)
The main capital expenditure approved relates to the investment in the new primary crushing area at Letšeng of
US$15.0 million. Other smaller capital expenditure, all at Letšeng, relates to investment in continued tailings storage extension
of US$1.3 million (31 December 2020: US$1.0 million), the construction of an employee centre of US$0.8 million linked to the
successful completion of the Business Transformation target, further mineral resource and reserve studies of US$0.5 million and
detailed engineering designs relating to the new primary crushing area of US$0.5 million. The expenditure is expected to be
incurred over the next 12 months.
Contingent rentals – Alluvial Ventures
The contingent rentals represent the Group’s obligation to a third party (Alluvial Ventures) for operating a third plant on the Group’s
mining property at Letšeng Diamonds. The rental is determined when the actual diamonds mined by Alluvial Ventures are sold. The
agreement is based on 39.5% to 60% (2020: 39.5% to 60%) of the value (after costs) of the diamonds recovered by Alluvial Ventures
and is limited to US$1.4 million (2020: US$1.4 million) per individual diamond. As at the reporting date, such future sales cannot be
estimated reliably due to the variability within these estimations.
Contingencies
The Group has conducted its operations in the ordinary course of business in accordance with its understanding and interpretation
of commercial arrangements and applicable legislation in the countries where the Group has operations. In certain specific
transactions, however, the relevant third party or authorities could have a different interpretation of those laws and regulations that
could lead to contingencies or additional liabilities for the Group. Having consulted professional advisers, the Group has identified
possible disputes approximating US$0.2 million (December 2020: US$0.2 million).
The Group monitors possible tax claims within the various jurisdictions in which the Group operates. Management applies
judgement in identifying uncertainties over tax treatments and concluded that there were no uncertain tax treatments relating
to the current year. Refer Note 1.2.28, Critical accounting estimates and judgements. There remains a risk that further tax liabilities
may potentially arise. While it is difficult to predict the ultimate outcome in some cases, the Group does not anticipate that there
will be any material impact on the Group’s results, financial position or liquidity.
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203
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021 (CONTINUED)
25. RELATED PARTIES
Related party
Jemax Management (Proprietary) Limited
Government of the Kingdom of Lesotho
Refer Note 1.1.2, Operational information, for information regarding shareholding in subsidiaries.
Compensation to key management personnel (including Directors)
Share-based equity transactions
Short-term employee benefits
Post-employment benefits (including severance pay and pension)
Fees paid to related parties
Jemax Management (Proprietary) Limited
Royalties paid to related parties
Government of the Kingdom of Lesotho
Lease and licence payments to related parties
Government of the Kingdom of Lesotho
Sales to/(purchases from) related parties
Jemax Management (Proprietary) Limited
Non-executive director
Amount included in trade payables owing to related parties
Jemax Management (Proprietary) Limited
Amounts owing to related party
Government of the Kingdom of Lesotho
Dividends declared
Government of the Kingdom of Lesotho
Dividends payable
Government of the Kingdom of Lesotho
Relationship
Common director
Non-controlling interest
2021
US$’000
2020
US$’000
248
4 655
152
5 055
344
3 562
93
3 999
(93)
(83)
(20 214)
(18 425)
(70)
(132)
(6)
11
(8)
(4)
–
(9)
(5 337)
(3 955)
(3 890)
(7 452)
–
(3 064)
Jemax Management (Proprietary) Limited provided administrative services with regards to the mining activities undertaken by the
Group. A controlling interest is held by an Executive Director of the Company.
The transaction relating to the non-executive director was for the sale of a polished diamond. All proceeds were received prior to
year end.
The above transactions were made on terms agreed between the parties and were made on terms that prevail in arm’s length
transactions.
26. FINANCIAL RISK MANAGEMENT
Financial risk factors
The Group’s activities expose it to a variety of financial risks:
• market risk (including commodity price risk, foreign exchange risk and interest rate risk);
• credit risk; and
• liquidity risk.
The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise
potential adverse effects on the Group’s financial performance.
Risk management is carried out under policies approved by the Board of Directors. The Board provides principles for overall risk
management, as well as policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative
financial instruments and non-derivative financial instruments, and investing excess liquidity.
There have been no changes to the financial risk management policy since the prior year.
Capital management
For the purpose of the Group’s capital management, capital includes the issued share capital, share premium and liabilities on the
Group’s statement of financial position. The primary objective of the Group’s capital management is to ensure that it maintains a strong
credit rating and healthy capital ratios in order to support its business and maximise shareholder value. The Group manages its capital
structure and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the Group
may issue new shares or restructure its debt facilities. The management of the Group’s capital is performed by the Board.
The Group’s capital management, among other things, aims to ensure that it meets financial covenants attached to its interest-
bearing loans and borrowings. Breaches in meeting the financial covenants would permit the bank to immediately call loans and
borrowings. There have been no breaches of the financial covenants in the current year.
At 31 December 2021, the Group had US$74.3 million (31 December 2020: US$60.8 million) of undrawn debt facilities and continues
to have the flexibility to manage the capital structure more efficiently by the use of these debt facilities, thus ensuring that an
appropriate gearing ratio is achieved.
Refer Note 17, Interest bearing loans and borrowings for detail on the debt facilities in the Group.
a) Market risk
(i) Commodity price risk
The Group is subject to diamond price risk. Diamonds are not homogeneous products and the price of rough diamonds is
not monitored on a public index system. The fluctuation of prices is related to certain features of diamonds such as quality
and size. Diamond prices are marketed in US dollar and long-term US dollar per carat prices are based on external market
consensus forecasts. The Group does not have any financial instruments that may fluctuate as a result of commodity price
movements.
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204
205
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021 (CONTINUED)
26. FINANCIAL RISK MANAGEMENT (continued)
Capital management (continued)
a) Market risk (continued)
(ii) Foreign exchange rate risk
The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily
with respect to the Lesotho loti, South African rand and Botswana pula. Foreign exchange risk arises when future commercial
transactions, recognised assets and liabilities are denominated in a currency that is not the entity’s functional currency.
The Group’s sales are denominated in US dollar which is the functional currency of the Company, but not the functional
currency of the operations.
The currency sensitivity analysis below is based on the following assumptions:
• Differences resulting from the translation of the financial statements of the subsidiaries into the Group’s presentation
currency of US dollar, are not taken into consideration;
•
•
The major currency exposures for the Group relate to the US dollar and local currencies of subsidiaries. Foreign
currency exposures between two currencies where one is not the US dollar are deemed insignificant to the Group
and have therefore been excluded from the sensitivity analysis; and
The analysis of the currency risk arises because of financial instruments which are denominated in a currency that is
not the functional currency of the relevant Group entity. The sensitivity has been based on financial assets and
liabilities at 31 December 2021 and 31 December 2020.
There has been no change in the assumptions or method applied from the prior year.
Sensitivity analysis
At year-end, Letšeng had US$22.1 million (2020: US$31.1 million) cash on hand held in US$. If the US dollar had appreciated/
(depreciated) by 10% against the LSL, the Group’s profit before tax and equity at 31 December 2021 would have been
US$2.4 million higher/(lower) (31 December 2020: US$2.8 million).
(iii) Forward exchange contracts
From time to time, the Group enters into forward exchange contracts to hedge the exposure to changes in foreign currency
of future sales of diamonds at Letšeng Diamonds. The Group performs no hedge accounting. At 31 December 2021, the
Group had no forward exchange contracts outstanding (31 December 2020: US$nil).
(iv) Interest rate risk
The Group’s income and operating cash flows are substantially independent of changes in market interest rates. The Group’s
cash flow interest rate risk arises from borrowings. Borrowings issued at variable rates expose the Group to cash flow interest
rate risk. At the time of taking new loans or borrowings, management uses its judgement to decide whether it believes that
a fixed or variable rate borrowing would be more favourable to the Group over the expected period until maturity.
Sensitivity analysis
If the interest rates on the interest-bearing loans and borrowings (increased)/decreased by 80 basis points (2020: 80 basis
points) during the year, profit before tax and equity would have been US$0.1 million (lower)/higher (31 December 2020:
US$0.1 million). The assumed movement in basis points is based on the currently observable market environment, which
remained consistent with the prior year and assumed a continued impact of the COVID-19 pandemic for the year.
26. FINANCIAL RISK MANAGEMENT (continued)
Capital management (continued)
(b) Credit risk
The Group’s potential concentration of credit risk consists mainly of cash deposits with banks, trade receivables, insurance asset
and other receivables. The Group’s short-term cash surpluses are placed with banks that have investment grade ratings, to
minimise the exposure to credit risk to the lowest level possible from the perspective of the Group’s cash and cash equivalents.
The maximum credit risk exposure relating to financial assets is represented by their carrying values as at the reporting dates.
The Group considers the credit standing of counterparties when making deposits to manage the credit risk.
Considering the nature of the Group’s ultimate customers and the relevant terms and conditions entered into with such
customers, the Group believes that credit risk is limited as the customers pay and settle their accounts on the date of receipt
of goods.
The Group’s insurance premiums are placed with insurers and underwriters that have high-quality credit standings, to minimise
the exposure to credit risk to the lowest level possible from the perspective of the Group’s insurance asset.
No other financial assets are impaired or past due and accordingly, no additional ECL or credit risk analysis has been provided.
The Group did not hold any form of collateral or credit enhancements for its credit exposures during the 31 December 2021 and
31 December 2020 financial reporting periods.
(c) Liquidity risk
Liquidity risk arises from the Group’s inability to obtain the funds it requires to comply with its commitments including the
inability to realise a financial asset in a short period of time at a price close to its fair value. Management manages the risk by
maintaining sufficient cash, marketable securities and ensuring access to financial institutions and shareholding funding. This
ensures flexibility in maintaining business operations and maximises opportunities. The Group has available debt facilities of
US$74.3 million at year end (2020: US$60.8 million).
The table below summarises the maturity profile of the Group’s financial liabilities at 31 December based on contractual
undiscounted payments, excluding discontinued operation:
Floating interest rates
Interest-bearing loans and borrowings
– Within one year
– After one year but not more than five years
Total
Lease liabilities
– Within one year
– After one year but not more than five years
Total
Trade and other payables
– Within one year
– After one year but not more than five years
Total
2021
US$’000
2020
US$’000
2 758
8 856
11 614
1 459
4 282
5 741
22 188
2 095
24 283
14 960
1 750
16 710
2 375
5 880
8 255
28 823
2 029
30 852
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206
207
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021 (CONTINUED)
2021
US$’000
2020
US$’000
27.
SHARE-BASED PAYMENTS (continued)
The following table reflects details of all the awards within the 2007 LTIP that remain outstanding:
27.
SHARE-BASED PAYMENTS
The expense recognised for employee services received during the year is shown
in the following table:
Equity-settled share-based payment transactions charged to the statement of profit or loss
– continuing operation
Equity-settled share-based payment transactions charged to the statement of profit or loss
– discontinued operation
395
2
397
555
6
561
The long-term incentive plans are described below:
Long-term incentive plan (LTIP)
Certain key employees are entitled to a grant of options, under the LTIP of the Company. The vesting of the options is dependent on
employees remaining in service for a prescribed period (normally three years) from the date of grant. The fair value of share options
granted is estimated at the date of the grant using an appropriate simulation model, taking into account the terms and conditions upon
which the options were granted. It takes into account projected dividends and share price fluctuation co-variances of the Company.
There is a nil or nominal exercise price for the options granted. The contractual life of the options is 10 years and there are no cash
settlement alternatives. The Company has no past practice of cash settlement.
The Company's LTIP policy is reviewed every 10 years.
LTIP 2007 Award
Under the 2007 LTIP rules, there are three awards where options are still outstanding.
All four awards were awarded on the following basis:
To key employees (excluding Executive Directors):
•
•
•
•
the awards vest over a three-year period in tranches of a third of the award each year;
the vesting of the award is dependent on service conditions and certain performance targets being met for the same
three-year period (classified as non-market conditions). These non-market condition awards are referred to as Nil Value
options in the tables below;
if the performance or service conditions are not met, the options lapse;
the performance conditions relating to the non-market conditions are not reflected in the fair value of the award at
grant date;
• once the awards vest, they are exercisable for seven years (i.e. contractual term is 10 years); and
•
the vested awards are equity settled.
To Executive Directors:
•
•
•
•
•
the awards vest over a three-year period;
the vesting of the award is dependent on service conditions and both market and non-market performance conditions;
75% of the awards granted are subject to non-market conditions (referred to as Nil Value options in tables below) and 25% to
market conditions (referred to as Market Value options in tables below) by reference to the Company’s total shareholder
return (TSR) as compared to a group of principal competitors;
if the performance or service conditions are not met, the options lapse;
the performance conditions relating to the non-market conditions are not reflected in the fair value of the award at
grant date;
• once the awards vest, they are exercisable for seven years (i.e. contractual term is 10 years); and
•
the vested awards are equity settled.
The fair value of the Nil value awards is based on the observable Gem Diamonds Limited share price on the date of award with no
adjustments to the price made.
Number of options granted – Nil value
Number of options granted – Market value
Date exercisable
Options outstanding
Dividend yield (%)
Expected volatility1 (%)
Risk-free interest rate2 (%)
Expected life of option (years)
Exercise price (US$)
Exercise price (GBP)
Weighted average share price (US$)
Fair value of nil value options (US$)
Fair value of nil value options (GBP)
Fair value of market value options (US$)
Fair value of market value options (GBP)
Model used
LTIP
March
2016
LTIP
April
2015
LTIP
June
2014
LTIP
March
2014
456 750
152 250
1 215 000
185 000
15 March 2019
34 287
2.00
39.71
0.97
3.00
nil
nil
1.56
1.40
0.99
0.69
0.49
625 000
–
10 June 2017 19 March 2017
5 000
0.00
–
–
3.00
nil
nil
2.87
2.87
1.74
–
–
–
–
0.00
37.25
1.94
3.00
nil
nil
2.70
2.70
1.61
1.83
1.09
Monte Carlo Monte Carlo Monte Carlo
1 215 000
185 000
1 April 2018
5 000
2.00
37.18
1.16
3.00
nil
nil
2.10
1.97
1.33
1.18
0.80
1 Expected volatility was based on the average annual historic volatility of the Company’s share price over the previous three years.
2 The relevant risk-free interest rate is taken from a UK Treasury Bond issued which closely matches the lifetime of the option.
LTIP 2017 Award
Under the 2017 LTIP rules, there are three awards where options are still outstanding.
All the awards were issued on the same basis as the 2007 LTIP.
During the current year there were no new awards granted in terms of the LTIP.
The following table reflects details of all the awards within the 2017 LTIP that remain outstanding:
LTIP
June
2020
LTIP
March
2019
LTIP
March
2018
LTIP
July
2017
Number of options granted – Nil value
Number of options granted – Market value
Date exercisable
Options outstanding
Dividend yield (%)
Expected volatility1 (%)
Risk-free interest rate2 (%)
Expected life of option (years)
Exercise price (US$)
Exercise price (GBP)
Weighted average share price (US$)
Fair value of nil value options (US$)
Fair value of nil value options (GBP)
Fair value of market value options (US$)
Fair value of market value options (GBP)
Model used
1 160 500
142 500
1 069 000
180 000
1 265 000
185 000
9 June 2023 20 March 2022 20 March 2021
302 639
0.00
40.00
1.2
3.00
nil
nil
1.35
1.35
0.96
0.74
0.53
1 150 000
185 000
4 July 2020
73 917
2.00
40.21
0.67
3.00
nil
nil
1.24
1.11
0.86
0.72
0.56
Monte Carlo Monte Carlo Monte Carlo Monte Carlo
1 068 132
0.00
47.00
0.34
3.00
nil
nil
0.39
0.39
0.31
0.19
0.15
964 198
0.00
43.00
1.2
3.00
nil
nil
1.20
1.20
0.90
0.58
0.44
1 Expected volatility was based on the average annual historic volatility of the Company’s share price over the previous three years.
2 The relevant risk-free interest rate is taken from a UK Treasury Bond issued which closely matches the lifetime of the option.
2021Gem Diamonds Limited Annual Report and AccountsPresenting the Gem Diamonds Annual Report and Accounts 2021 | Strategic report | Performance reviewGovernance | Directors’ report | Financial statements | Report on payments to governments | Additional information 208
209
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021 (CONTINUED)
27.
SHARE-BASED PAYMENTS (continued)
The following table illustrates the number (’000) and movement in the outstanding share options during the year:
28. FINANCIAL INSTRUMENTS
Set out below is an overview of financial instruments, other than the current portions of the prepayment disclosed in Note 12,
Receivables and other assets, which do not meet the criteria of a financial asset. These prepayments are carried at amortised cost.
Outstanding at beginning of year
Granted during the year
Exercised during the year1
Forfeited
Balance at end of year
Exercisable at end of year
2021
’000
3 887
–
(855)
(579)
2 453
454
2020
‘000
4 002
1 249
(480)
(884)
3 887
535
1 Options were exercised regularly throughout the year. The weighted average share price during the year was £0.60 (US$0.83) (2020: £0.39 (US$0.50).
The weighted average remaining contractual life for the share options outstanding as at 31 December 2021 was 7.5 years
(2020: 7.9 years).
The weighted average fair value of the share options outstanding as at 31 December 2021 was US$0.65 (2020: US$0.79).
ESOP
In September 2017, 47 200 shares which were previously held in the Company Employee Share Trust were granted to certain key
employees involved in the Business Transformation of the Group. The Company Employee Share Trust was deregistered in 2017
following the grant of these shares. The fair value of the award was valued at the share price of the Company at the date of the
award of £0.71 (US$0.96). These shares vested on 18 March 2019 and became immediately exercisable. The fair value of these
outstanding awards at 31 December 2021 was £0.47 (US$0.65) (2020: £0.41 (US$0.52)). The shares outstanding at the end of the
year are as follows:
Outstanding at beginning of year
Granted during the year
Exercised during the year
Balance at end of year
Exercisable at end of year
2021
’000
17
–
(7)
10
10
2020
‘000
47
–
(30)
17
17
Notes
2021
US$’000
2020
US$’000
Financial assets at amortised cost
Cash – continuing operations
Cash – discontinued operation
Receivables and other assets – continuing operations
Receivables and other assets – discontinued operation
Total
Total non-current
Total current
Financial liabilities at amortised cost
Interest-bearing loans and borrowings
Trade and other payables – continuing operations
Trade and other payables – discontinued operation
Total
Total non-current
Total current
The carrying amounts of the Group’s financial instruments held approximate their fair value.
There were no open hedges at year end (2020: nil).
29. DIVIDENDS DECLARED AND PROPOSED
Declared dividends on ordinary shares
Final ordinary cash dividend for 2020: 2.5 US cents per share (2019: Nil)
14
15
12
15
17
19
15
30 913
144
4 398
45
35 500
1 278
34 222
11 044
24 283
446
35 773
10 435
25 338
49 820
7
4 490
195
54 512
153
54 359
16 087
30 852
471
47 410
3 730
43 680
2021
US$’000
2020
US$’000
3 509
–
The 2020 proposed dividend was approved on 2 June 2021 and a final cash dividend of 2.5 US cents per share was paid to
shareholders on 15 June 2021.
A proposed ordinary cash dividend of 2.7 US cents per ordinary share for 2021 is subject to approval at the AGM to be held on
8 June 2022 and is not recognised as a liability as at 31 December.
2021Gem Diamonds Limited Annual Report and AccountsPresenting the Gem Diamonds Annual Report and Accounts 2021 | Strategic report | Performance reviewGovernance | Directors’ report | Financial statements | Report on payments to governments | Additional information 210
211
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021 (CONTINUED)
30. EVENTS AFTER THE REPORTING PERIOD
31. MATERIAL PARTLY OWNED SUBSIDIARY
Events which occurred after the reporting period relating to the discontinued operation and the status of the sales process have
been disclosed in Note 15 Assets held for sale. These events did not require any adjustments to the financial statements.
Financial information of Letšeng Diamonds, a 70% held subsidiary which has a material non-controlling interest, with the remaining
30% being held by the Government of the Kingdom of Lesotho, is provided below.
Events which occurred after the reporting period relating to the successful implementation of the security on certain revolving
credit facilities within the Group have been disclosed in Note 17 Interest-bearing loans and borrowings. These events did not
require any adjustments to the financial statements.
On 23 February 2022, the South African corporate income tax rate was reduced from 28% to 27% for companies with years of assessment
ending on or after 31 March 2023. The change in tax rate will affect recorded deferred tax assets and liabilities and effective tax rate in
the future. The new corporate tax rate of 27% is considered to be substantively enacted on 23 February 2022 and is expected to not
have a material impact on the Group. This event did not require any adjustment to the financial statements and will be applicable to
Gem Diamonds Technical Services, the Group’s South African subsidiary.
Progress relating to the amended tax assessment issued to Letšeng by the LRA has been disclosed in Note 1.2.28 Critical accounting
estimates and judgements.
An ordinary cash dividend of 2.7 US cents for the 2021 financial year has been proposed. This is subject to approval at the AGM to be held
on 8 June 2022.
No other fact or circumstance has taken place between the end of the reporting period and the approval of the financial statements
which, in our opinion, is of significance in assessing the state of the Group’s affairs or requires adjustments or disclosures.
Name
Letšeng Diamonds (Proprietary) Limited
Accumulated balances of material non-controlling interest
Profit allocated to material non-controlling interest
The summarised financial information of this subsidiary is provided below.
This information is based on amounts before intercompany eliminations.
Summarised statement of profit or loss for the year ended
31 December
Revenue
Cost of sales
Gross profit
Royalties and selling costs
Other income/(expenses)
Operating profit
Net finance costs
Profit before tax
Income tax expense
Profit for the year
Total comprehensive income
Attributable to non-controlling interest
Dividends paid to non-controlling interest
Dividends payable to non-controlling interest
Summarised statement of financial position as at 31 December
Assets
Non-current assets
Property, plant and equipment, deferred tax assets, intangible assets and
receivables and other assets
Current assets
Inventories, receivables and other assets, and cash and short-term deposits
Total assets
Non-current liabilities
Interest-bearing loans and borrowings, trade and other payables, provisions, lease
liabilities and deferred tax liabilities
Current liabilities
Interest-bearing loans and borrowings, trade and other payables and lease
liabilities
Total liabilities
Total equity
Attributable to:
Equity holders of parent
Non-controlling interest
Summarised cash flow information for the year ended 31 December
Operating cash inflows
Investing cash outflows
Financing cash outflows
Foreign exchange differences
Net (decrease)/increase in cash and cash equivalents
Country of
incorporation
and operation
Lesotho
2021
US$’000
2020
US$’000
76 845
12 458
79 906
10 683
198 510
(120 751)
186 579
(112 081)
77 759
(20 879)
1 110
57 990
(2 470)
55 520
(13 993)
41 527
41 527
12 458
(6 685)
–
74 498
(19 043)
(6 695)
48 760
(2 840)
45 920
(10 307)
35 613
35 613
10 683
(4 658)
(3 064)
313 028
325 009
61 455
374 483
78 098
403 107
95 261
101 203
23 072
118 333
256 150
179 305
76 845
77 824
(68 655)
(30 582)
1 271
(20 142)
35 553
136 756
266 351
186 445
79 906
105 471
(48 700)
(20 640)
2 787
38 918
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REPORT ON PAYMENTS TO GOVERNMENTS
INTRODUCTION
This report provides an overview of the payments made to
governments by Gem Diamonds Limited and its subsidiaries (the
Group) for the 31 December 2021 financial year, as required under
the UK Report on Payments to Governments Regulations 2014 (as
amended December 2015). These UK Regulations enact domestic
rules in line with Directive 2013/34/EU (the EU Accounting
Directive (2013) and apply to companies that are involved in
extractive activities.
This report is also filed with the National Storage Mechanism
intended to satisfy the requirements of the Disclosure Guidance
and Transparency Rules of the Financial Conduct Authority in the
UK.
The Gem Diamonds Limited LEI number is
213800RC2PGGMZQG8L67.
BASIS FOR PREPARATION
Reporting entities
This report
includes payments to governments made by
subsidiaries in the Group that are engaged in extractive activities.
During the 2021 financial year, extractive activities were conducted
in Lesotho while the operation in Botswana was under care and
maintenance. All payments made in relation to the Botswana
entity were under the materiality level and therefore not reported.
Extractive activities
Extractive activities relate to the exploration, prospection,
discovery, development and extraction of minerals, oil, natural gas
deposits or other materials. Gem Diamonds Limited, through its
subsidiaries, is engaged in diamond mining activities.
Scope of payments
The report discloses only those significant payments made to
governments arising from extractive activities.
Government
Government includes any national, regional, or local authority
of a country. It includes a department, agency or undertaking
(i.e. corporation) controlled by that authority.
Payment types disclosed at legal entity
level
PRODUCTION ENTITLEMENTS
There were no payments of this nature for the year ended
31 December 2021.
TAXES
These are payments on the entity’s income, production, or profits,
excluding taxes levied on consumption such as value added
taxes, personal income taxes or sales taxes in line with in-country
legislation.
ROYALTIES
These are payments for the right to extract diamonds and
are determined on percentage of sales in terms of in-country
legislation and/or mining lease agreements.
DIVIDENDS
These are dividend payments, other than dividends paid to a
government as an ordinary shareholder of an entity unless paid
in lieu of production entitlements or royalties. There were no
dividend payments of this nature to governments for the year
ended 31 December 2021.
SIGNATURE, DISCOVERY, AND PRODUCTION
BONUSES
There were no payments of this nature to governments for the
year ended 31 December 2021.
LICENCE FEES
These are fees paid for acquisition of leases and licences, including
annual renewal fees, in order to obtain and maintain access to the
areas in which extractive activities are performed.
PAYMENTS FOR INFRASTRUCTURE IMPROVEMENTS
There were no payments of this nature to governments for the
year ended 31 December 2021.
Cash flow basis
Payments reported are on a cash flow basis and may differ to
amounts reported in the Gem Diamonds Limited 2021 Annual
Report and Accounts, which are prepared on an accrual basis.
REPORT ON
PAYMENTS TO
GOVERNMENTS
for the year ended 31 December 2021
Gem Diamonds Limited Annual Report and Accounts
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REPORT ON PAYMENTS TO GOVERNMENTS CONTINUED
Materiality level
In line with the guidance provided in the Report on Payments to
Governments Regulations, payments made as a single payment,
or as a series of related payments, which are equal to or exceed
US$110 000 (£86 000), are disclosed in this report. All payments
below this threshold have been excluded.
Reporting currency
The payments to government have been reported in US dollar.
Payments made
in currencies other than US dollar were
translated at the relevant annual average rate for the year ended
31 December 2021.
SUMMARY REPORT
Operation
Country
Taxes US$’000
Royalties
US$’000
Licence fee
US$’000
Total US$’000
Letšeng Diamonds (Proprietary) Limited
Lesotho
Total
23 104
23 104
18 050
18 050
150
150
41 304
41 304
Lesotho
Letšeng Diamonds (Proprietary) Limited
Lesotho Revenue Authority
Government of Kingdom of Lesotho
Taxes US$’000
Royalties
US$’000
Licence fee
US$’000
Total US$’000
23 104
–
–
18 050
–
150
23 104
18 200
ADDITIONAL
INFORMATION
2021
Gem Diamonds Limited Annual Report and Accounts 216
217
ADDITIONAL INFORMATION CONTINUED
ADDITIONAL INFORMATION CONTINUED
ABBREVIATIONS AND DEFINITIONS
AGM
AIFR
AV
Annual General Meeting
All injury frequency rate
Alluvial Ventures (a third-party contractor)
Basotho
Lesotho nationals
BEPS
BT
BWP
CAGR
CCSA
CDP
CEO
CFO
CI
CLO
CO2e
COO
cpht
CSI
CSR
CSRI
DMS
DTR
Basic earnings per share
Business Transformation
Botswana pula
Compound annual growth rate
Climate Change Scenario Analysis
Carbon Disclosure Project
Chief Executive Officer
Chief Financial Officer
Continuous Improvement
Community Liaison Officer
Carbon dioxide equivalent
Chief Operating Officer
Carats per hundred tonnes
Corporate social investment
Corporate social responsibility
Corporate social responsibility investment
Dense Medium Separation
Disclosure Guidance and Transparency Rules
EBITDA
Earnings before interest, tax, depreciation and
amortisation
EPS
ESG
ESOP
EU
EY
FCA
FRC
FTSE
GCM
GDIP
GDP
GHG
GIA
GISTM
GRI
ha
Earnings per share
Environmental, social and governance
Employee Share Option Plan
European Union
Ernst & Young
Financial Conduct Authority
Financial Reporting Council
Financial Times Stock Exchange
General circulation model
Gem Diamonds Incentive Plan
Gross domestic product
Greenhouse gas
Gemological Institute of America
Global Industry Standard on Tailings
Management
Global Reporting Initiative
Hectare
HSSE
IAS
ICMM
IFRS
IPCC
ISO
IT
JIBAR
KPI
LIBOR
LoM
LSL
LTI
LTIFR
LTIP
MRM
Health, safety, social and environment
International Accounting Standards
International Council on Mining and Metals
International Financial Reporting Standard
International Panel on Climate Change
International Organization for Standardization
Information technology
Johannesburg Interbank Agreed Rate
Key Performance Indicator
London Interbank Offered Rate
Life of mine
Lesotho loti
Lost time injury
Lost time injury frequency rate
Long-term incentive plan
Mineral Resource Management
Net cash/
(debt)
The sum of cash and cash equivalents less
drawn down bank facilities (excluding asset-
based finance facility and insurance premium
financing)
PAC
PCA
PPE
RCF
SDG
SEIA
SEMP
SLL
STIB
TCFD
Project-affected community
Primary crushing area
Personal protective equipment
Revolving credit facility
Sustainable Development Goal
Social and environmental impact assessment
Social and environmental management plan
Sustainability-linked loan
Short-term incentive bonus
Task Force on Climate-related Financial
Disclosures
The Board
The Gem Diamonds Board of Directors
The Group
The Gem Diamonds Company and its
subsidiaries
TSF
TSR
UK
UN
US$
Tailings storage facility
Total shareholder return
United Kingdom
United Nations
United States dollar
USA/US
United Stated of America
VAT
Value added tax
CONTACT DETAILS AND ADVISERS
FINANCIAL ADVISER AND
SPONSOR
JPMorgan Cazenove
Limited
20 Moorgate
London EC2R 6DA
United Kingdom
T: +44 (0) 20 7588 2828
F: +44 (0) 20 7155 9000
AUDITORS
Ernst & Young
Incorporated
102 Rivonia Road
Sandton
2146
South Africa
T: +27 (0) 11 772 3000
FINANCIAL PUBLIC RELATIONS
ADVISER
Celicourt Communications
Adam House
7 – 10 Adam Street, The Strand
London WC2N 6AA
United Kingdom
T: +44 (0) 20 7520 9265
FINANCIAL ADVISERS
Liberum Capital Limited
Ropemaker Place, Level 12
25 Ropemaker Street
London EC2Y 9LY
United Kingdom
T: +44 (0) 20 3100 2000
F: +44 (0) 20 3100 2099
Panmure Gordon & Co.
One New Change
London EUM 9AF
United Kingdom
T: +44 20 7886 2500
GEM DIAMONDS LIMITED
Registered office
2nd Floor, Coastal Building
Wickhams Cay II
PO Box 2221
Road Town
Tortola
British Virgin Islands
Head office
2 Eaton Gate
London SW1W 9BJ
United Kingdom
T: +44 (0) 203 043 0280
F: +44 (0) 203 043 0281
LEGAL ADVISER
Linklaters
One Silk Street
London EC2Y 8HQ
United Kingdom
T: +44 (0) 20 7456 2000
F: +44 (0) 20 7456 2222
FEEDBACK
Gem Diamonds Limited
Glenn Turner
T: +44 (0) 203 043 0280
E: IR@gemdiamonds.com
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ADDITIONAL INFORMATION CONTINUED
ADDITIONAL INFORMATION CONTINUED
DIRECTORS’ AND EXECUTIVE MANAGEMENT CVs
Non-Executive Directors
Appointed to the Board in June 2017
Skills and experience
Harry has over 39 years of experience in the mining industry, principally with Rio
Tinto. He is a geologist by training and his experience spans operations, marketing,
projects, finance and business development. He has worked in South Africa, Australia
and the UK. Until 2015, Harry was a member of the Group Executive Committee
of Rio Tinto, where he held the roles of CEO of Energy and before that CEO of
Diamonds and Minerals. Prior to this he variously led Rio Tinto’s global titanium
dioxide business, was CEO of Rio Tinto’s listed subsidiary, Energy Resources of
Australia Limited, was general manager of operations at Palabora Mining Company
in South Africa and held senior marketing roles in copper, uranium and industrial
minerals. He began his career as an underground geologist with Anglo American on
the gold mines in South Africa.
Current external appointments
Harry is currently a senior adviser to McKinsey & Co.
Harry is a member of the advisory board of Schenck Process AG; and a non-Executive
Director of Sibanye-Stillwater; and several private companies.
Appointed to the Board in January 2018
Skills and experience
Mike has over 37 years’ experience in the resources industry in operational, senior
management and director roles. He spent six years in Switzerland as the Managing
Director technical at Pala, where he oversaw all technical aspects of the mining
sector investments, including the risks associated with resource performance,
project management, ramp-up, operations, and the associated working capital and
financial controls. Prior to joining Pala, Mike spent 21 years with De Beers in southern
Africa in various roles, culminating in the post of chief operating officer where he
was accountable for five operating mines, including greenfield and brownfield
growth projects. He also managed the restructuring at De Beers Consolidated Mines
in 2005/2006 and again in 2009. Mike has overseen growth projects and building of
mines in Namibia, South Africa, Sierra Leone, Vietnam and USA.
Current external appointments
Mike is currently a non-Executive Director of Nevada Copper.
MIKE BROWN (61)
NON-EXECUTIVE DIRECTOR
BSc Engineering; Mining PR Eng (ECSA)
Engineering (University of Witwatersrand);
Strategic Executive Programme (London
Business School)
Chairperson
Member
Member
Chairperson
Member
Member
Appointed to the Board in December 2015; appointed Senior Independent
Director in November 2017
Skills and experience
Michael spent a 38-year career with Ernst & Young (EY), having led its Global Oil
and Gas, UK IPO and Global Oil and Gas and Mining transaction advisory practices.
He was a member of EY’s assurance Practice from 1974 to 1996, when he transferred
to the Transaction Advisory Practice. He was also UK Alumni sponsor and a member
of the firm’s Europe, Middle East, India, and Africa and Global Advisory Councils.
He retired from EY as a partner in 2012 and continued as a consultant to the firm
until November 2013.
Current external appointments
Michael is currently chair of Little Green Pharma Ltd; and non-Executive Director
and chair of the Remuneration Committee of Barloworld Limited.
Appointed to the Board in May 2021
Skills and experience
Rosalind is the founder and Managing Director of Kina Advisory Limited, a trusted
adviser to Boards and Senior Executives of global companies on sustainability and
responsible business investment and partnerships in emerging markets. She trained
as a lawyer and is a member of the Bar of England and Wales and of the Chartered
Institute of Arbitrators. Rosalind has almost 30 years of combined international,
senior management, executive and board level experience. She has worked with
companies and organisations including Linklaters, Anglo American Corporation of
South Africa, De Beers, Tullow Oil plc, the United Nations Environment Programme
and ERM, and on projects across Africa, in the UK, Europe, North and South America,
Asia, and the South Pacific. As a result, she has a wide network and is respected
across a range of stakeholders from governments and corporates through civil
society organisations and media for her professional expertise and as a woman of
integrity and credibility.
Current external appointments
Rosalind is currently the Managing Director of Kina Advisory Limited and a non-
Executive Director for discoverIE plc, CalBank plc (Ghana) and two private companies.
Member
Member
Member
ROSALIND KAINYAH MBE
(64)
NON-EXECUTIVE DIRECTOR
BA (Hons) (University of Ghana), LLB (Hons)
(University of London), LLM (University College,
University of London), Member of the Bar of
England & Wales (Gray’s Inn), MCIArb
HARRY KENYON-
SLANEY (61)
NON-EXECUTIVE CHAIRPERSON
BSc Geology (Southampton University),
International Executive Programme
(INSEAD France)
CHAIRPERSON TENURE <9 YEARS
NO INDEPENDENCE CONFLICT EXISTS
MICHAEL LYNCH-BELL
(68)
NON-EXECUTIVE DIRECTOR
BA Hons Economics and Accountancy
(University of Sheffield); FCA of the Institute of
Chartered Accountants in England and Wales
Chairperson
Chairperson
Member
Committee icons
Audit
Remuneration
Nominations
Sustainability
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ADDITIONAL INFORMATION CONTINUED
ADDITIONAL INFORMATION CONTINUED
Appointed to the Board in July 2019
Skills and experience
Mazvi has over 22 years’ experience in senior management positions, including
leading roles in the mining sector, having served as the resident director and chief
executive officer of Letšeng Diamonds Proprietary Limited until 2017. Furthermore,
Mazvi was also the founder and president of the Lesotho Chamber of Mines (2016).
Prior to her work in the mining industry, Mazvi was involved in the Ministry of
Natural Resources and the Central Bank of Lesotho, where she was the senior legal
counsel for each of these entities.
Since joining the Board, Mazvi has been appointed as the designated non-Executive
Director for workforce engagement.
Current external appointments
Mazvi is currently a non-Executive Director of First National Bank Lesotho Limited
and a non-Executive Director of several private companies.
Member
Founded Gem Diamonds in July 2005
Skills and experience
Clifford joined Anglo American Corporation in 1986 and was seconded to
E Oppenheimer & Son Proprietary Limited as Harry Oppenheimer’s personal
assistant in 1988. In 1990, he was appointed Managing Director of E Oppenheimer
& Son, a position he held until leaving in December 2004. During that time, Clifford
was also a Director of Central Holdings, Anglo American and DB Investments.
Following the privatisation of De Beers in 2000, Clifford served on the De Beers
Executive Committee.
Current external appointments
Clifford is currently the non-Executive Chairperson of Zanaga Iron Ore Co. Limited.
MAZVI MAHARASOA (52)
NON-EXECUTIVE DIRECTOR
BLLM International and Commercial Law
(University of Buckingham)
Executive Directors
CLIFFORD ELPHICK (61)
CHIEF EXECUTIVE OFFICER
BCom (University of Cape Town);
BCompt Hons (University of South Africa)
Committee icons
Audit
Remuneration
Nominations
Sustainability
Appointed to the Board in April 2013
Skills and experience
Michael has over 22 years’ experience in financial management. He joined the
audit firm RSM Betty & Dickson in Johannesburg, South Africa in January 1993 and
became audit partner at the firm in March 2000. From August 2006 to February
2008 Michael was seconded to Gem Diamonds Limited to assist with the financial
aspects of the main London listing, including the financial reporting, management
accounting and tax relating to the initial public offering. In March 2008 Michael joined
Gem Diamonds on a full-time basis as the Group Financial Manager. On 2 April 2013
he was promoted to the position of Chief Financial Officer and appointed to the
Board.
Current external appointments
None
Served on the Board from April 2008 to November 2017
Skills and experience
Glenn was called to the Johannesburg Bar in 1987, where he spent 14 years
practising as an advocate specialising in general commercial and competition
law and took silk in 2002. Glenn was appointed De Beers’ first general counsel in
2002 and was also a member of its Executive Committee. He was responsible for a
number of key initiatives during his tenure, including overseeing De Beers’ re-entry
into the USA.
Current external appointments
Glenn is currently a non-Executive Director of Agribiomed Limited and Lineout
Holdings Limited.
Skills and experience
Brandon joined Gem Diamonds in 2007 from Clifford Chance LLP. Practising in New
York and London, he specialised in debt and equity capital markets and corporate
finance gaining extensive commercial and legal experience in international corporate
and finance transactions, stock exchange listings in London, Luxembourg and New
York and in the UKLA (UK) and SEC (USA) rules and regulations. At Gem Diamonds,
Brandon has been responsible for numerous corporate and financial transactions.
He was head of the Group’s Sales, Marketing and Manufacturing division from 2013
to 2017 when he was appointed as the Group Business Transformation Officer. In
2019 Brandon was appointed as the Group Operations and Business Transformation
Executive and in 2021 as Chief Operating Officer.
Current external appointments
None
MICHAEL MICHAEL (51)
CHIEF FINANCIAL OFFICER
BCom Hons (Rand Afrikaans University); CA(SA)
Executive Management
GLENN TURNER (61)
CHIEF LEGAL AND COMMERCIAL
OFFICER AND COMPANY SECRETARY
BA; LLB (University of Cape Town);
LLM (Cambridge)
BRANDON DE BRUIN (50)
CHIEF OPERATING OFFICER
BCom; LLB (University of the Witwatersrand)
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ADDITIONAL INFORMATION CONTINUED
ADDITIONAL INFORMATION CONTINUED
Skills and experience
Jaco joined Gem Diamonds in 2016. His technical and managerial career
spans more than 25 years. He has a diverse background in areas of operational
excellence, design, production, technical support, Safety, Health, Environment
and Quality (SHEQ) and consulting. He has been involved in the development and
implementation of a turnaround plan, performance improvement initiatives, cost
reduction measures, volume expansion at an operation, project, and group level.
He has led and assisted in the development of technical strategies, pre-feasibility
and feasibility studies, design, commissioning and technical evaluation reviews.
He led the safety, occupational hygiene and environmental departments at a large
corporate for more than two years. He spent some time in business improvement
and applied financial modelling skills to enhance operational delivery through the
optimisation of the value chain to maximise value for the business.
Current external appointments
None
JACO HOUMAN (47)
SENIOR MANAGER: TECHNICAL AND
PROJECTS
B.Eng(Met) (University of Pretoria); MBA
(University of Witwatersrand Business School)
Committee icons
Audit
Remuneration
Nominations
Sustainability
DISCLOSURES RELATED TO THE RECOMMENDATIONS OF THE TCFD
Governance
Disclose the organisation’s governance around climate-related risks and opportunities.
Recommended Disclosure
Describe the Board's oversight of climate-
related risks and opportunities.
References
Our Approach to Climate Change, page 27. Our Sustainability Report, page 6 and 14. Our Annual
Report and Accounts 2021, pages 87, 90, 109 and 113. Our Sustainable Development Reporting
platform www.gemdiamonds-reports.co.za/reports/sd-2022/index.php
Describe management's role in assessing
and managing climate-related risks and
opportunities.
Our Approach to Climate Change, page 27. Our Sustainability Report, page 27 and 42. Our Annual
Report and Accounts 2021, pages 37, 48 and 52. Our Sustainable Development Reporting platform
www.gemdiamonds-reports.co.za/reports/sd-2022/index.php
Strategy
Disclose the actual and potential impacts of climate-related risks and opportunities on the organisation’s businesses, strategy and
financial planning, where such information is material.
Recommended Disclosure
Describe the climate-related risks and
opportunities the organisation has
identified over the short, medium and
long term.
Describe the impact of climate-
related risks and opportunities on the
organisation's businesses, strategy and
financial planning.
Describe the resilience of the organisation's
strategy, taking into consideration different
climate-related scenarios, including a 2°C or
lower scenario.
References
Our Approach to Climate Change, page 30. Our Sustainability Report, page 19. Our Annual
Report and Accounts 2021, pages 38 and 65. Our Sustainable Development Reporting platform
www.gemdiamonds-reports.co.za/reports/sd-2022/index.php
Our Approach to Climate Change, page 29. Our Sustainability Report, page 22. Our Annual
Report and Accounts 2021, page 38. Our Sustainable Development Reporting platform
www.gemdiamonds-reports.co.za/reports/sd-2022/index.php
Our Approach to Climate Change, page 29. Our Sustainability Report, page 22. Our Annual
Report and Accounts 2021, page 38. Our Sustainable Development Reporting platform
www.gemdiamonds-reports.co.za/reports/sd-2022/index.php
Disclose how the organisation identifies, assesses and manages climate-related risks.
Recommended Disclosure
References
Risk Management
Describe the organisation's processes for
identifying and assessing climate-related
risks.
Our Approach to Climate Change, page 32. Our Sustainability Report, page 22. Our Annual
Report and Accounts 2021, page 37. Our Sustainable Development Reporting platform
www.gemdiamonds-reports.co.za/reports/sd-2022/index.php
Describe the organisation's processes for
managing climate-related risks.
Our Approach to Climate Change, page 33. Our Sustainability Report, page 21. Our Annual
Report and Accounts 2021, page 37. Our Sustainable Development Reporting platform
www.gemdiamonds-reports.co.za/reports/sd-2022/index.php
Describe how processes for identifying,
assessing and managing climate-related
risks are integrated into the organisation's
overall risk management.
Our Approach to Climate Change, page 32. Our Annual Report and Accounts 2021, page 37. Our
Sustainable Development Reporting platform www.gemdiamonds-reports.co.za/reports/sd-
2022/index.php
Metrics and Targets
Disclose the metrics and targets used to assess and manage relevant climate-related risks and opportunities where such information
is material.
Recommended Disclosure
Disclose the metrics used by the
organisation to assess climate-related
risks and opportunities in line with its
strategy and risk management process.
References
Our Approach to Climate Change, page 34. Our Sustainability Report, page 22. Our Annual
Report and Accounts 2021, page 73. Our Sustainable Development Reporting platform
www.gemdiamonds-reports.co.za/reports/sd-2022/index.php
Disclose Scope 1, Scope 2 and, if
appropriate, Scope 3 greenhouse gas
(GHG) emissions, and the related risks.
Our Approach to Climate Change, page 35. Our Sustainability Report, page 20. Our Annual
Report and Accounts 2021, page 35. Our Sustainable Development Reporting platform
www.gemdiamonds-reports.co.za/reports/sd-2022/index.php
Describe targets used by the organisation
to manage climate-related risks and
opportunities and performance against
targets.
Our Approach to Climate Change, page 34. Our Sustainability Report, page 22. Our Annual
Report and Accounts 2021, page 34. Our Sustainable Development Reporting platform
www.gemdiamonds-reports.co.za/reports/sd-2022/index.php
2021Presenting the Gem Diamonds Annual Report and Accounts 2021 | Strategic report | Performance reviewGovernance | Directors’ report | Financial statements | Report on payments to governments | Additional informationGem Diamonds Limited Annual Report and Accounts
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NOTES
GREYMATTERFINCH # 15773
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