TABLE OF CONTENTS
PRESENTING THE GEM DIAMONDS ANNUAL REPORT AND
ACCOUNTS 2022 ........................................................................................
2
STRATEGIC REPORT ...................................................................................
3
Our guiding principles ....................................................................................................................................................... 4
The salient features of 2022 ............................................................................................................................................... 5
How the Group is structured ............................................................................................................................................. 7
Our business model ........................................................................................................................................................... 8
Why invest in Gem Diamonds ........................................................................................................................................... 10
Overarching business drivers ........................................................................................................................................... 11
Chairperson’s statement ................................................................................................................................................... 14
Our stakeholder relationships ........................................................................................................................................... 17
Our strategy ....................................................................................................................................................................... 21
Our approach to climate change ...................................................................................................................................... 25
Risk management ............................................................................................................................................................. 36
Viability statement ............................................................................................................................................................. 43
PERFORMANCE REVIEW ...........................................................................
45
Chief Executive Officer’s review ........................................................................................................................................ 46
Chief Financial Officer’s review .......................................................................................................................................... 49
Operations review .............................................................................................................................................................. 56
Sustainability ...................................................................................................................................................................... 64
GOVERNANCE ...........................................................................................
88
Chairperson’s introduction to corporate governance ..................................................................................................... 89
Governance at a glance .................................................................................................................................................... 92
Directorate and executive management ......................................................................................................................... 94
Corporate governance statement ..................................................................................................................................... 96
Nominations Committee ................................................................................................................................................... 108
Sustainability Committee ................................................................................................................................................. 111
Audit Committee ............................................................................................................................................................... 114
Remuneration Committee ................................................................................................................................................. 119
DIRECTORS’ REPORT .................................................................................
142
FINANCIAL STATEMENTS ........................................................................
146
REPORT ON PAYMENTS TO GOVERNMENTS .....................................
209
ADDITIONAL INFORMATION ..................................................................
211
Abbreviations and definitions ........................................................................................................................................... 211
Contact details and advisers ............................................................................................................................................. 213
Directors and executive management CVs ....................................................................................................................... 214
Disclosures related to the recommendations of the TCFD .............................................................................................. 219
Gem Diamonds Limited Annual Report and Accounts 1
PRESENTING THE
GEM DIAMONDS ANNUAL REPORT
AND ACCOUNTS 2022
The Annual Report and Accounts covers Gem Diamonds Limited
and its subsidiaries (the Group) for the financial year ended
31 December 2022.
This report has been prepared in accordance with:
Regulatory guidance Voluntary guidance
• 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 Task Force on Climate-related Financial
Disclosures (TCFD).
• 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.
• Guidance from the International Integrated Reporting
Framework, which is publicly available at
www.integratedreporting.org.
• Guidance from the Global Reporting Initiative (GRI)
Standards as updated from time to time.
• Guidance from the International Finance Corporation
Environmental, Health and Safety (IFC EHS) Guidelines and
Equator Principles.
• Applicable standards of the International Organization for
Standardization (ISO).
THE 2022 REPORTING SUITE
In addition to this report, our reporting suite includes:
Our Sustainability Report 2022
The Annual Report and Accounts should be read in conjunction with Our Sustainability Report where we provide extensive detail
on environmental, social and governance (ESG) matters. Additional information and case studies on the Group’s sustainability
activities can be found on www.gemdiamonds.com.
Our Approach to Climate Change Report 2022
Additional information on the Group’s approach to climate change and related financial disclosures can be found in Our
Approach to Climate Change Report 2022 at www.gemdiamonds.com.
Board approval of this report
The Board, supported by the Audit Committee, is responsible for ensuring 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
stakeholders, including the communities and environment, when making decisions. We believe the report provides a balanced
and appropriate representation of the Group’s performance, strategy and material risks. Acting fairly and in good faith, we have
considered what is most likely to promote the long-term sustainability and success of Gem Diamonds.
The Board approved the Annual Report and Accounts 2022, which includes the Strategic Report, on 15 March 2023.
By order of the Board
Harry Kenyon-Slaney
Chairperson
15 March 2023
2
OUR GUIDING
PRINCIPLES
CARAT
CLARITY
Purpose
Produce the best diamonds, in the best way, leaving a
lasting legacy
Vision
A world full of Gem diamonds
CUT
COLOUR
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 promote a culture of ethical behaviour and
conduct ourselves in a manner consistent with good
governance practices. We have zero tolerance for bribery
and corruption and pride ourselves on being socially and
environmentally responsible.
Respect – We cultivate an open and transparent culture
where we respect and 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
(PACs) 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.
Culture
At Gem Diamonds we invest in our workforce to create an
environment where every person is proud to be part of our
organisation. Mutual respect and care are not only shared
throughout the Group but extend to the wider society.
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.
We support, develop and empower our people so that:
• a meaningful, sustainable contribution is made to the
countries in which we operate;
• we can deliver long-term value to our shareholders; and
• our employees benefit in the short and long term.
Refer to our Chairperson’s statement on page14 for more information about our purpose and vision.
STRATEGIC REPORT
4
THE SALIENT FEATURES OF 2022
Zero fatalities and three lost time injuries (LTIs) for 2022. The
Group also implemented a critical control management
strategy, an important safety risk mitigation initiative, as part of
its organisational safety culture maturity programme. A Leading
Indicator Safety Committee was established to support safety-
specific workforce engagement.
107 498 carats sold in eight well-attended and competitive
tenders in Antwerp and two successful tender viewings in
Dubai. An average price of US$1 755 per carat was achieved.
Prices achieved reflect strong demand throughout 2022 with a
slight softening of prices in Q4. This demand was supported by
a better than expected performance by global luxury jewellery
brands.
In June 2022, an exceptional quality 244 carat white diamond
was recovered at Letšeng. This discovery followed the recovery
of a 129 carat diamond and a 125 carat diamond in May 2022.
Since its acquisition in 2006, 126 greater than 100 carat rough
diamonds have been recovered at the mine.
Gem Diamonds was awarded the Best
Climate-Related Reporting (Small Cap)
award at the ESG Investing Awards 2022.
The award acknowledges our 2021 Climate
Change Report, which focused on how
climate change considerations are being
incorporated into financial planning and
strategy at the Group. ESG Investing is a
global media platform publishing news on
sustainability for the investor community.
Gem Diamonds won three awards at the
Investing in African Mining Indaba Junior ESG
Awards, in the categories of Health and Safety
and of Responsible Water and Protection of
Biodiversity in May 2022, and another award in
February 2023 for Water (management and the
prevention of pollution). These awards
recognise the Group’s work to deliver on our
commitment to the environment, our
workforce and PACs.
The Group completed our climate-change
related 2022 objectives and is on track to
meet our three-year TCFD adoption plan
which commenced in 2021. A total of
US$0.5 million was invested in climate
change-related work during the year.
We treated 5.5 million tonnes of ore, a decrease
of 11% compared to 2021. The reduction can
mainly be attributed to the planned expiry of
the Alluvial Ventures (AV) contract on 30 June
2022, an increased frequency of electricity
disruptions, and the Lesotho national elections
which required a two-day shutdown.
In line with our commitment to deliver
sustainable shareholder returns, a share
buyback programme was launched in April
2022. 1 520 170 shares were purchased for
US$1.2 million and are held as treasury
shares. A dividend of 2.7 US cents was paid
in June 2022.
A decrease in waste tonnes mined, in line with
the mine plan, and the implementation of
steeper slopes in the Main pit, together with
several initiatives aimed at energy use
efficiency and carbon reduction, resulted in a
27% year on year reduction of the Group’s total
carbon footprint.
The Group spent approximately US$0.5 million on corporate social investment (CSI) projects. This included three tertiary
scholarships to enhance skills in Lesotho in mining, engineering and emergency medical care. We purchased additional cows
for our diary project, constructed 50 ablution facilities in local villages and schools, and completed the construction of the
Lesotho Legend egg circle projects. Our focused CSI strategy and initiatives support our social licence to operate and our
commitment to the United Nations Sustainable Development Goals (UN SDGs).
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Gem Diamonds Limited Annual Report and Accounts 5
2022 IN NUMBERS
Measure
2022 2021 % change
Average price per carat achieved (US$) 1 755 1 835 (4)
Revenue (US$ million) 188.9 201.9 (6)
Total direct cash cost (excluding waste costs) per tonne treated (LSL) 263.1 201.1 31
Total direct cash cost (including waste costs) per tonne treated (LSL) 386.1 335.5 15
Total operating cost per tonne treated (LSL) 345.1 271.8 27
Earnings before interest, tax, depreciation and amortisation (EBITDA) (US$
million)
1
43.7 57.4 (24)
Profit for the year (US$ million)* 20.2 27.4 (26)
Corporate costs including depreciation (US$ million) 9.0 8.9 1
Basic earnings per share (EPS) (US cents)
2
* 7.3 10.5 (30)
Cash and short-term deposits (US$ million) 8.7 31.1 (72)
Cash generated from operating activities 63.0 71.3 (12)
Drawn down bank facilities (US$ million) 5.4 10.2 (47)
Net cash (US$ million)
3
3.3 20.9 (84)
Available bank facilities (US$ million) 82.6 74.3 11
Average number of employees (including contractors) 1 612 1 671 (4)
Gender diversity (% female employees including contractors) 22 22 –
Skills development (training hours) 24 928 33 694 (26)
Fatalities 0 0 –
Lost time injuries (LTIs) 3 6 (50)
Lost time injury frequency rate (LTIFR) 0.13 0.24 (46)
All injury frequency rate (AIFR) 0.70 0.93 (25)
ISO 45001 (occupational health and safety) certification Yes Yes –
Capital expenditure excluding waste (US$ million) 11.9 4.0 198
Ore tonnes treated (millions) 5.5 6.2 (11)
Waste tonnes mined 10.2 18.7 (46)
Carats recovered 106.7 115.3 (7)
Carats sold 107.5 109.7 (2)
Corporate Social Investment (CSI) 0.5 0.8 (38)
Major or significant stakeholder incidents 0 0 –
Major or significant environmental incidents reported 0 0 –
Significant tailings storage facility breaches 0 0 –
Total carbon footprint (tCO
2
e) 112 827 153 863 (27)
ISO 14001 (environmental management) certification Yes Yes –
Financial
People
Operational
Sustainability
1 Refer Note 4, Operating profit on page 177 for the definition of non-GAAP (Generally Accepted Accounting Principles) measures.
2 Refer to Group financial performance for GAAP measures on page 151.
3 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).
*The prior year figures have been re-presented, as Gem Diamonds Botswana (Proprietary) Limited (Ghaghoo Diamond Mine) ceased to be classified as a discontinued operation during
the current financial reporting period. Refer Note 15, Assets held for sale.
STRATEGIC REPORT
6
HOW THE GROUP
IS STRUCTURED
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OUR BUSINESS MODEL
STRATEGIC REPORT
8
OUR BUSINESS MODEL
Our viability statement on page 43 explains how the outcomes ultimately lead to a sustainable business model that delivers on
our vision.
*Images supplied by Graff Diamonds International.
Financial
People
Sustainability
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Gem Diamonds Limited Annual Report and Accounts 9
WHY INVEST IN
GEM DIAMONDS
The Group has a unique and compelling investment proposition
based on 10 core attributes.
Large, high-value diamonds Embedded corporate governance
Integrated 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
STRATEGIC REPORT
10
OVERARCHING
BUSINESS DRIVERS
OPERATING
RESPONSIBLY
Shareholders, funders, regulators,
employees, communities, consumers and
other stakeholders expect companies to
adhere to responsible and ethical practices.
This includes providing safe working
conditions and fair labour practices for
employees, operating in an environmentally
responsible manner, ensuring the safe
operation and governance of dams and
tailings storage facilities, preparing for and
responding to climate-related risks and
opportunities, and contributing to global
and local sustainability initiatives.
Consumers, shareholders and funders are
increasingly interested in ESG factors when
making buying, investment and lending
decisions. For mining companies, one of the
most prominent topics on the ESG agenda is
climate change preparedness and carbon
emissions reduction.
Following the growing demand for
sustainable jewellery and the need for
traceability programmes, certain jewellery
manufacturers and retailers are insisting on
proof of traceability and provenance of
diamonds.
Refer to Our approach to climate change on
pages 25, Sustainability on page 64 and Our
Sustainability Report for more insight.
GEM DIAMONDS’ POSITION
We are committed to ethical business practices, and corporate governance is a
core component of our long-term sustainability and value creation. We regularly
enhance our workplace safety systems and processes to ensure that we protect
our employees.
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 our tailings storage facility management practices are
aligned with the International Council on Mining and Metals’ (ICMM) Global
Industry Standard on Tailings Management (GISTM). Our 2022 and 2023 awards
for sound ESG practices and climate reporting illustrate our leading position on
sustainability.
All our diamond exports comply with the Kimberley Process
1
. We are transparent
and protect the provenance of all our diamonds, and we participate in the
Gemological Institute of America’s (GIA) Diamond Origin programme. This gives
consumers information regarding the country of origin of their diamonds and
the positive impact the diamonds we mine have on the communities and
countries in which we operate.
US$0.8 million invested in environmental stewardship
(2021: US$0.9 million)
0.70 AIFR
(2021: 0.93)
Zero major or significant environmental or stakeholder incidents reported
(2021: 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 Chief Executive Officer’s
Review and the Chief Financial Officer’s
Review on pages 46 and 49 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, continually improving efficiencies,
reducing costs and enhancing cash generation. The Group has initiatives in place
to prioritise cash generation and maintain cash reserves. 2022 was a challenging
year as our cost base increased, driven largely by an increase in fuel and other
consumable prices. We are investigating ways to reduce the consumption of fuel
and to mitigate our reliance on diesel generators when grid power is unavailable.
By maintaining sustainable returns, the Group can continue to access equity and
debt funding for current operations, offer sound shareholder returns, and invest
in our future plans.
US$43.7 million EBITDA
2
(2021: US$57.4 million)
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:
www.kimberleyprocess.com.
2
Refer Note 4, Operating profit on page 177 for the definition of non-GAAP measures.
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Gem Diamonds Limited Annual Report and Accounts 11
MARKET DEMAND FOR
DIAMONDS
Market demand for diamonds will be shaped
by the traditional industry factors of
affordability, desirability, value chain
efficiency, and the buying experience.
Diamond affordability relies heavily on the
pace of economic growth and consumers’
disposable income. Desirability is measured
by the share of diamond jewellery sales
within total jewellery and luxury
consumption, as well as cultural acceptance
of diamond jewellery gifting. The growing
custom of using diamonds 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 increased demand for
polished diamonds.
GEM DIAMONDS’ POSITION
We sell the majority of our rough diamonds on tender and are, to a large extent,
subject to immediate market forces. We also have agreements to sell diamonds
directly to the contract manufacturers for some of the world’s premium luxury
brands.
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 turbulence, and
historically the prices for larger high-quality diamonds have been more resilient
to short to medium-term market pressures.
The diamond market rebounded strongly in 2021 following the material impact
of the COVID-19 pandemic. Prices for larger high-value diamonds recovered
quickly, and the strong demand for larger diamonds continued in 2022 before
softening slightly in Q4 2022. Prices on Letšeng’s smaller diamonds (<5 carats)
also improved significantly, supported by price increases for smaller diamonds
by De Beers in Q1 2022. In addition, the sanctions imposed on Russia, with Alrosa
being a major Russian diamond producer, caused a reduction in the supply of
rough diamonds. However, despite these sanctions, Alrosa’s diamonds are now
finding their way back into the market.
Notwithstanding the continued recovery of the diamond market, the average
price per carat achieved for Letšeng’s diamonds during the year was 4% lower
compared to 2021. This was mainly due to fewer large diamond recoveries (four
greater than 100 carat diamonds sold in 2022 compared to six in 2021, and 87
diamonds between 30 and 100 carats compared to 97 in 2021), due largely to
lower value domains of the resource that were mined.
Source: Data provided by Paul Zimnisky (www.paulzimnisky.com.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 slight softening of rough and polished diamond
prices during 2022, indexed to 2 January 2022.
US$1 755 average price per carat achieved in 2022
(2021: US$1 835 per carat)
69% of revenue derived from diamonds greater than 10.8 carats in 2022
(2021: 71%)
STRATEGIC REPORT
12
DIAMOND SUPPLY
The supply of diamonds is inextricably linked
to the economics of diamond mining. In
extended periods of low rough diamond
prices, mines close which reduces supply.
Established producers tend to maintain
stockpile inventory, primarily in lower value
commercial diamonds, which they release
into the market as demand ticks up,
resulting in a slower price increase in the
short term following an increase in demand.
The popularity of lab-grown diamonds is
growing, along with their size and quality.
Sales of lab-grown diamonds have jumped
from 4% of the overall diamond market in
2019 to 10% in 2022, according to consumer
trends forecaster WGSN Insight. These
diamonds sell at a significant discount to
natural diamonds and continue to grow in
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.
Total global rough diamond supply decreased to approximately 119 million
carats in 2022 compared to 139 million carats in 2019. This is largely due to a
combination of planned mine closures, COVID-19 driven closures of marginal
mines and suspension and slowdown of certain other operations and, more
recently, the sanctions imposed on Russia and consequently Alrosa. The lower-
than-expected production of rough diamonds in 2021 provided an opportunity
for miners, such as De Beers, to release some of their stockpile inventory into the
market, and their reported inventory levels are lower, which allowed De Beers to
implement price increases in Q1 2022.
We have several 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 robust and
competition from lab-grown diamonds is yet to be seen on this end of the
premium market.
119 million carats global rough diamond production in 2022 (estimated)
(2021: 120 million carats)
SOCIAL VALUE
The Letšeng mine, which is co-owned with
the Government of the Kingdom of Lesotho
(30%), is an important employer and makes
a substantial positive contribution to the
country’s socio-economic development.
Refer to Sustainability on page 64 and Our
Sustainability Report for more insight into
our social contribution.
GEM DIAMONDS’ POSITION
We acknowledge our privileged position as guests in the countries where we
operate, and strive to maintain mutually beneficial relationships with our
employees, communities, regulators, governments and wider society. We
develop and empower our people, and endeavour to make a meaningful,
sustainable contribution to the countries and communities in which we operate.
We engage the government, employees and communities in life of mine
communications to inform them about relevant aspects of our operations and
the expected economic lives of our mines.
The Group’s community investments are informed by engagements with the
PACs to identify needs such as access to tertiary education, basic infrastructure
provision (roads, bridges and water supply) and local businesses enhancement
to create long-term sustainable employment opportunities independent of the
mine.
Letšeng makes a significant contribution to the Lesotho economy through
dividends, royalties and tax contributions, and provides employment for more
than 1 534 people. This number excludes 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.
51 student scholarships since 2006
US$39.7 million paid in dividends, royalties and taxes in Lesotho
(2021: US$48.3 million)
US$0.5 million invested in local communities in Lesotho
(2021: US$0.8 million)
US$129.0 million Letšeng in-country procurement
(2021: US$161.8 million)
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Gem Diamonds Limited Annual Report and Accounts 13
CHAIRPERSON’S STATEMENT
The Board steered the Group through another challenging and
uncertain year. We made important progress in our climate
change journey by adopting a decarbonisation strategy and a
carbon-pricing model. The challenge for the year ahead will be to
continue operating safely, effectively and cost-efficiently.
As the custodian of our stakeholders’
interests, the Board constantly strives to
improve overall governance. We believe that
good governance ensures the long-term
sustainability and success of our business
and the preservation of value for our
stakeholders.
Harry Kenyon-Slaney
Chairperson
Dear shareholders,
On behalf of the Board of Directors, I am pleased to share with you the Gem Diamonds Annual Report and Accounts for 2022,
which outlines the Group’s performance over the past year and some of our focus areas for the year ahead.
In the early months of 2022, as the threat of the COVID-19 pandemic subsided, we were finally able to return to something
approaching normal operations. While the experience of the past two years has been very difficult for our workforce, their
families and our local communities, the community of spirit generated during the fight against the pandemic has built new levels
of trust and enabled us to extend our employee health improvement programmes.
While the world emerged from one crisis, it was immediately plunged into another as Russia invaded Ukraine. The consequences
of this conflict were widely felt as they impacted supply chains, exacerbated inflation and increased energy costs. Just about
every country has had to grapple with sharply rising input costs and the trifecta of accelerating inflation, rising interest rates and
the lingering impact of COVID-19, weighing down global growth.
At Gem Diamonds, we felt the impact of these pressures through a sharp rise in the price of diesel and countless other
inflationary increases in the cost of important commodities, machinery and services. Added to this was the well-documented
deterioration in the reliability of the supply of grid power by Eskom, which meant we had to frequently resort to using diesel-
powered generators. As a result, we experienced a steep rise in input costs which resulted in our EBITDA falling 24% to US$43.7
million (2021: US$57.4 million). While revenue fell 6% to US$188.9 million on the back of a slightly lower volume of carats
recovered, 2022 was a solid year overall from an operational perspective.
Demand for high-quality diamonds was strong in 2021 and this robust market continued into 2022. Market strength was further
underpinned by the imposition of sanctions on Russia's Alrosa, which caused a shortage of smaller diamonds. In Q4 2022
consumer demand weakened slightly, although pleasingly demand for Letšeng's exceptional white diamonds remained firm and
we achieved an average price per carat of US$1 755 compared to US$1 835 in 2021.
The Letšeng mine is located in a remote and pristine region in Lesotho, and the Group's overarching ethos is to operate at all
times in an exemplary social and environmentally responsible manner. Our continued inclusion in the FTSE4Good Index and our
receipt of various awards in recognition of the work we do around our operation and communities are validation that our ESG
programmes deliver real value. There were no major or significant environmental incidents reported at any of our operations
during the year.
GOVERNANCE IMPROVEMENTS FOR 2022
Despite being a small Group with a small Board of Directors, I am pleased that our governance structure is aligned with the
independence requirements of the UK Corporate Governance Code. While we acknowledge that there is always room for
improvement, I believe we have further strengthened our governance structures over the past two years, and have established
an effective rhythm and cadence to the work of our Board. Specifically, we have worked to clarify governance processes,
allocated more time for routine and strategic Board deliberations, and ensured the smooth running of the important work of our
Board subcommittees.
STRATEGIC REPORT
14
One area where I believe we can improve further is to carve out sufficient Board time to better understand the future strategic
opportunities available to the Group. As the Letšeng orebodies are mined progressively deeper, we are accelerating our analysis
of possible future development pathways for the mine, including whether it is economically feasible to transition to
underground operations. In addition, we need to consider our future beyond our ownership of a single operational asset.
In 2022, we once again reassessed and refreshed our positions on human rights, modern slavery, corruption and climate change
as part of our approach to combatting these global systemic challenges. As part of this process, our employees and contractors
reaffirmed their commitment to these important statements.
The Nominations Committee oversees Board and senior management succession planning, with the objective of ensuring that
our leadership is appropriately sized, regularly reinvigorated, and offers a wide range of diversity and skill sets. I am satisfied that
the Board contains the right balance of gender, experience and complementary perspectives to ensure the appropriate
independent oversight of the Group.
Maintaining a diverse workforce in an atmosphere where everyone feels included is hugely important to me personally, and it
gives me great pride to see the work that Gem Diamonds has done over the years to achieve a representation of almost 98%
Lesotho nationals at Letšeng. The representation of female employees at Letšeng remains lower than we would like, and we
continue to work closely with local communities and schools to promote mining and Letšeng as a company as rewarding and
safe places for women to aspire to join.
THE BOARD’S PRIORITIES IN 2022
• Conducting an external Board effectiveness evaluation
• Overseeing the execution of the Group’s climate change strategy
• Advancing efforts to sell or exit the Ghaghoo mine in Botswana, which remains on care and maintenance
• Approving the share buyback programme announced in April 2022
• Considering the way forward for Letšeng, including the initial results of the Underground Feasibility Study
• Considering external growth opportunities
SUPPORTING ORGANISATIONAL ETHICS
Gem Diamonds maintains a strong set of ethical principles that provides a firm foundation for 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, and 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.
OUR PURPOSE AND VISION
In November 2022, the Board approved a new purpose and vision for the Group. The new purpose “Produce the best diamonds,
in the best way, leaving a lasting legacy”, outlines the Group’s purpose in a way that is clear and easily understood. This purpose
replaces “Unearthing unique possibilities”. It speaks to our ambition to produce high-quality diamonds in a way that protects our
workforce, local communities and the environment. We have a long-term perspective, and we aim to leave a positive legacy in
the countries in which we operate. This involves making meaningful investments in our local communities that will have a lasting
impact, supporting education, health and skills development, and creating and maintaining an open and constructive working
relationship with governments at a local and national level.
Our new vision “A world full of Gem diamonds” speaks to actively pursuing expansion and growth opportunities for Gem
Diamonds, elevating the brand and ensuring it is synonymous with large, high-value diamonds, a passionate workforce and an
ethical culture. All elements of our previous vision remain relevant and have been encapsulated in our new purpose.
FOSTERING A STRONG SAFETY CULTURE
We regard the safety and health of our employees as our single most important priority. I am pleased to report that during 2022
we continued to drive our safety and health initiatives, and we again suffered no fatal accidents and experienced only three lost
time injuries resulting in a lost time injury frequency rate (LTIFR) of 0.13, a strong improvement on the 0.24 achieved in 2021. The
all injury frequency rate (AIFR) for the full year was 0.70 (2021: 0.93).
We recognise that maintaining a safe workplace requires relentless and close attention to detail and a strong and trusting
relationship with our workforce. To this end, during the year we implemented a safety improvement programme, with a specific
focus on safety leadership coaching, that was informed by a detailed safety performance survey carried out in 2021. During 2023
we will focus on embedding these new leadership skills into the organisation to improve the ability of employees at all levels to
identify and permanently eliminate risk from the operations, with the aim of further improving our safety performance.
GOVERNANCE OF WATER AND TAILINGS MANAGEMENT
Lesotho experienced unprecedented rainfall during 2022, resulting in Letšeng’s water storage facilities rising to their highest
levels on record. It was pleasing to see that our freshwater catchment areas functioned effectively despite the heavy rainfall, and
the mine now has a secure source of water for almost nine years based on current usage rates.
Presenting the Gem
Diamonds Annual Report
and Accounts 2022
Strategic
report
Performance
review Governance
Directors’
report
Financial
statements
Report on
payments to
governments
Additional
information
Gem Diamonds Limited Annual Report and Accounts 15
In line with global efforts to elevate the safety and security of all tailings and water storage facilities, Gem has put significant
emphasis into ensuring full alignment with all the new recommendations emerging from recent international tailings facility
failure investigations. This includes strict adherence to a management programme that includes daily inspections, monthly
audits and annual external audits. Our alignment with international standards is well established and our Independent Tailings
Review Board is led by one of the world’s leading dam-safety experts. We are confident that we have the right skills, systems and
governance to ensure appropriate water and tailings management in the future.
CONTINUING OUR CLIMATE CHANGE JOURNEY
We recognise that climate change is an existential issue for our planet that must be addressed. The Board is therefore determined
that the Group makes its contribution to this challenge when reviewing strategy, risk management, annual budgets and business
plans and when developing action plans and Group policies. The Board officially adopted the TCFD framework in 2021, and in
2022 we implemented the second phase of our three-year roadmap. This included the adoption of a decarbonisation strategy
and carbon-pricing model. We have set a target to reduce our Scope 1 and Scope 2 carbon emissions by 30% by 2030.
There is a great deal of global uncertainty within multinationals and capital markets on how corporates should respond to and
communicate their actions to address climate change. As a small Group with limited resources, we recognise that we must
prioritise those actions that will have the maximum benefit to the business and to Lesotho while also addressing climate change.
COMMUNITY AND GOVERNMENT ENGAGEMENT
We strive to always maintain constructive, open and honest dialogue with our local communities and government partners. We
consider their concerns and inform them about our business and the broader environment we require to thrive. Our ongoing
stakeholder engagement with communities and government ensures that the Board is kept abreast of issues as they emerge and
evolve.
In 2022, our communities were affected by unemployment and inflation, including steep increases in food and energy costs. In
these economic conditions, our ongoing investments in community support become increasingly important. We remain very
proud of the work we do to support our local communities, which is informed by a community needs analysis undertaken in
2021 and contributes to our UN SDG commitments. We believe that investing in our local communities will bolster the resilience
and sustainability of Letšeng in the long term.
Mining is a major contributor to Lesotho’s gross domestic product and offers considerable direct and indirect employment
opportunities during a mine’s lifespan. However, mines have a finite lifespan. This means that we must proactively engage with
our employees, communities and government to sensitise them to the expected ultimate closure of the mine. We aim to
maintain open dialogue with government as we begin preparing for the various pathways that might exist for the mine. As a
Board, we will work constructively with management, employees and communities as the long-term view emerges.
LOOKING TO THE FUTURE
Our actions in 2023 will be strongly influenced by the cost pressures that unfolded in 2022. Our efforts to contain costs will
require real productivity and efficiency improvements. This will also mean that we will need to be smarter in our technological
and operational choices.
During the year we will continue to work on defining the future development pathway for the Letšeng orebody. As the pits go
deeper, various options exist, including the possibility of a transition to underground operations, and we will consult widely
with all stakeholders as the options become clear.
We are now well placed to progress our environmental, social and governance (ESG) strategy, and will in particular be looking
at both the source and the intensity of the energy we use. If possible, we will identify partners with whom we can work to help
us switch to more renewable sources of power, both to reduce our carbon footprint and to lower our dependence on Eskom's
increasingly unreliable grid.
We are pleased that Lesotho's national elections in 2022 concluded peacefully and we welcome the transition to a new
government that is business-friendly and collaborative. We look forward to a constructive working relationship with the new
administration as we continue to further our contribution to the country’s economic development.
Antwerp in Belgium is a city that has been inextricably linked to the trade and manufacturing of rough diamonds for centuries.
The diamond market, however, is changing as diamond trading in new centres outside of Antwerp gain traction. We will
respond accordingly and embrace opportunities to work with and sell through other centres.
APPRECIATION
On behalf of the Board, I thank all our stakeholders who have contributed to the Group’s performance in 2022. Without the
support of our employees, contractors, community partners, the Government of the Kingdom of Lesotho and our shareholders,
we would be unable to operate effectively. Finally, a sincere thank you to my fellow directors for their dedication, insight and
support over the past year.
Harry Kenyon-Slaney
Chairperson
15 March 2023
STRATEGIC REPORT
16
OUR STAKEHOLDER
RELATIONSHIPS
We believe that proactive stakeholder engagement is a
fundamental principle of sustainability. We regularly communicate
with our stakeholders to stay relevant and better understand their
needs.
STAKEHOLDER MANAGEMENT
Gem Diamonds’ sound stakeholder relationships, particularly with employees, regulators, communities and society, are critical to
our social licence to operate. These relationships are built through regular engagement, and provide relevant insights for
decision-making while supporting the Group’s long-term sustainability and unlocking our ability to meaningfully contribute to
the broader society.
The Board is accountable for stakeholder engagement and stakeholder views and strategic issues raised by stakeholders are
regularly reviewed, clearly understood, and underpin the work of the Board. Stakeholder input is considered in decision-making
for strategy, sustainability, remuneration, CSI and other relevant matters.
Our stakeholder engagement strategy guides interactions with stakeholders. Our communication channels are detailed below.
Electronic channels Written communication Direct interaction Media
• Company website
• Virtual meetings
• Employee application (app)
• Email, SMS and WhatsApp
communications
• Electronic tender platform
• Annual Report and Accounts
• Our Sustainability Report
• Our Approach to Climate
Change Report
• Quarterly and interim results
statements and
presentations
• Newsletters
• In-person meetings
• AGMs
• Investor roadshows
• Results presentations
• Industry conferences
• Tenders
• Informal interaction
• Independent analysis of
community needs
• Community representative
meetings
• Employee Engagement
Committee
• Corporate Social
Responsibility Investment
(CSRI) Committee meetings
• Press releases
• Interviews
• Media briefings
• Social media platforms
The Group’s stakeholder engagement is assessed in the Board’s annual evaluation process. Executive Directors’ personal
performance objectives for determining short-term incentive bonuses include strengthening stakeholder relationships.
STAKEHOLDER ENGAGEMENT
Shareholders
Our shareholders include institutional and private shareholders. The shareholders are the owners of the Group, and the Board is
ultimately accountable to them for performance. They offer a potential avenue for the funding of future expansion opportunities.
Our strategy aims to maximise shareholder value in a sustainable manner.
The Chairperson, Senior Independent Director and Executive Directors regularly interact with shareholders at requested
meetings, during roadshows to larger investors, and at the Annual General Meeting (AGM), which is attended by all Directors.
The Chief Legal and Commercial Officer is responsible for the investor relations function and is supported by an independent
investor relations consultancy. Feedback and concerns from investors are considered at Board meetings.
Shareholder interests include:
• growth opportunities;
• sustainable returns and capital allocation;
• cash flow generation and balance sheet strength;
• ESG considerations including corporate governance and ethics, responsible environmental and social practices, as well as
climate change and tailings storage facility (TSF) management; and
• fair executive remuneration practices.
Presenting the Gem
Diamonds Annual Report
and Accounts 2022
Strategic
report
Performance
review Governance
Directors’
report
Financial
statements
Report on
payments to
governments
Additional
information
Gem Diamonds Limited Annual Report and Accounts 17
Engagements post the AGM
At the Group AGM in June 2022, the Board noted the proportion of the votes cast against the resolution referring to the authority
of Directors to allot shares (Resolution 13 passed with 58.55% of participating shareholders voting in favour). The Board was
disappointed in this outcome, given that the resolution reflects UK-listed company market practice. In view of a significant
shareholder’s position and standing policy on this matter, the Board and the Executive Management team have not engaged in
further consultation with the significant shareholder, but will continue to regularly consider their approach to this matter.
Majority interest in shares
On 15 February 2023, 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 Disclosure Guidance and Transparency Rules (DTR) 5:
Shareholders Number of ordinary
shares
% shareholding
Sustainable Capital Limited 30 469 182 21.9
Graff Investments Limited 20 861 931 15.0
Lansdowne Partners Limited 18 677 221 13.4
Aberforth Partners LLP 16 812 950 12.1
Gem Diamonds Holdings Limited 9 325 000 6.7
Hosking Partners LLP 5 066 516 3.6
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 139.4 million issued ordinary shares of US$0.01
each (excluding the 1.5 million treasury shares held by Gem Diamonds). Institutional shareholders hold 99.3 million shares (71%)
while private shareholders hold 40.1 million shares (29%).
Employees and contractors
Our employees and contractors are responsible for running our operations and delivering on our strategy. Operating in a remote
region in a country with a small talent pool makes the retention and development of local skills a priority. Gem Diamonds aims to
provide regular high quality communication to employees and facilitate platforms where employees can express their needs. The
well-being of employees is taken seriously. A full-time psychologist is employed at Letšeng to assist employees cope with mental
health issues while employees at the Johannesburg office have access to an employee wellness provider.
Management engages with employees through daily informal interactions, the employee app which launched at the end of
2022, the Employee Engagement Committee, the Group’s website and the quarterly Letšeng newsletter. Regular leadership visits
to Letšeng are undertaken, while “toolbox” talks with smaller shift teams provide additional opportunities for engagement.
In 2022, the Board reviewed the Group’s employee value proposition and the benefits offered by each subsidiary, and found
these to be fit for purpose. 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 key concerns raised. Mazvi chairs the Group-wide Employee
Engagement Committee that includes employee representatives from all companies in the Group.
One of the issues raised by employees was poor awareness of how to use the Group’s whistleblowing hotline. This resulted in a
new awareness roadshow being held with employees on how to use the whistleblowing hotline and how matters raised are
addressed. In addition, management developed a new reporting mechanism to communicate the outcome of whistleblowing
incidents.
Employee interests include
• fair treatment and safe working conditions;
• competitive remuneration; and
• skills development and opportunities for advancement.
Key employee projects for 2022
In 2022, a key focus was embedding the formalised Group-wide Employee Engagement Committee that was planned in 2021.
This included establishing the appropriate structures and communicating the role of the committee. The purpose of the
committee is to assist the Gem Diamonds Board in facilitating two-way communication to ensure that the workforce's voice is
heard in the boardroom and that Board expectations are communicated to employees. The Committee further provides a
platform for employees to exchange ideas and suggest ways to enhance employee engagement and work effectiveness.
In 2022, Gem Diamonds reviewed its Diversity and Equality Policy with a view to better addressing inclusion and assessing the
effectiveness of initiatives in place to improve diversity across the Group. The first gender diversity initiatives were implemented
in 2022, focusing on the various aspects that could impact women throughout the recruitment and appointment process. These
initiatives include unconscious bias training for interviewers and having a senior female participant in panel interviews. The focus
for 2023 will be on the medium-term retention and promotion of women throughout the Group. In 2023, we will assign mentors
to female employees at Letšeng and introduce role rotation as part of their development programmes to ensure that female
employees gain exposure to different areas of the mine.
STRATEGIC REPORT
18
Succession planning and recruiting local talent is always a priority. A formal Succession Committee is in place to review and
monitor compliance to the succession management policy and guidelines. In 2022, the Group extended the reach of its
recruiting practices by promoting the Group to skilled Lesotho nationals working in other countries. The intention is to create a
larger talent pool for the Group while attracting much-needed skills back into the country.
In December 2022, we launched an employee app called ‘LetšGem’. The app serves as a communication tool to facilitate a
greater understanding of the Group among employees – for example, by showcasing the various entities within the Group,
highlighting successful CSI initiatives or providing interviews with team members. The app allows for quick dissemination of
communications throughout the Group and for tracking of important communications. In addition, the app is designed to be
interactive, with a capability to host surveys. More than 95% of employees at Letšeng have a smartphone and can access free
internet connectivity. In 2023, we plan to add a training and development module to the app to drive Group-wide training. This
could include safety training, personal development courses or basic computer skills.
For more information about the LetšGem app, refer to the case study in Our Sustainability Report.
Bankers, insurers and funders
Banks and other funders allow the Group to invest in capital projects and expansion opportunities. Insurance providers allow us
to mitigate certain risk elements, and form part of the Group’s overall risk mitigation strategy.
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 regularly interacts with insurance brokers, with detailed
engagement around renewal anniversaries with oversight from Group risk management.
In December 2021, the Group-wide debt refinancing was successfully concluded with the renewal of the Group’s revolving credit
facilities for an amount of US$74.1 million for a three-year period. US$31.1 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). These KPIs are aligned to the Group’s sustainability strategy.
Providers of finance interests include:
• responsible management of the Group’s financial position to ensure commitments can be met as they fall due;
• performance against sustainability and climate-related targets for the SLLs;
• ESG practices and regulatory compliance, including effective management of tailings storage facilities; and
• transparency in reporting potential material matters in a timeous manner.
Refer to page 49 in the CFO review for more details.
Project-affected communities
We are committed to ensuring that our PACs benefit from our operations and we are mindful that the strength of these
relationships helps in safeguarding our social licence to operate.
We take a multi-level approach to stakeholder engagement, including monthly engagements with local community leaders,
quarterly meetings with residents of local villages, and regular forums with district-level stakeholders and leadership. Letšeng’s
Community Liaison Officer (CLO) engages with the surrounding communities, government officials and community-elected
representatives.
PACs select their community representatives, who sit on the Corporate Social Responsibility Investment (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 issues directly to mine
management.
Social and environmental impact assessments (SEIAs) and community needs analyses identify the most pressing community
needs and concerns. These are conducted through consultation processes facilitated by independent external specialists. The
needs and concerns identified through these independent studies form the foundation of our corporate social investment (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 and updates regarding progress on community projects;
• responsible and safe mining, environmental and social practices;
• responsible tailings management and disaster response mechanisms;
• local employment opportunities; and
• operational support in response to climate-related impacts, such as extreme weather events.
In 2022, the Group procured US$2.4 million of goods from PACs located around Letšeng and US$30.0 million of goods from the
broader Mokhotlong region. From 2016 to 2022 the Group has invested US$4.4 million in needs-based and sustainable CSI
initiatives. In 2022, the Group invested US$0.5 million in CSI projects in education, clean water, sanitation and small business
development.
Presenting the Gem
Diamonds Annual Report
and Accounts 2022
Strategic
report
Performance
review Governance
Directors’
report
Financial
statements
Report on
payments to
governments
Additional
information
Gem Diamonds Limited Annual Report and Accounts 19
Customers
Gem Diamonds’ sound customer relationships support demand for our unique diamonds and help to ensure that best prices
are achieved. We interact with customers regularly in the normal course of business and at tenders, and communicate through
the Company website and press releases. Customers can access 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;
• transparency and traceability of the provenance of rough diamonds; and
• responsible environmental and social practices.
Eight rough diamond tender viewings were held in Antwerp and two viewings were held in Dubai in March and September,
respectively. Tenders were well attended and the competitive bidding was evidence of strong demand for our high-quality
diamonds.
Suppliers and business partners
Suppliers and business partners provide the products and services we require to run our operations and achieve our strategic
objectives, and we therefore build strong relationships with core suppliers. Formal written contracts and negotiations, applying
the principles of transparency, our beliefs and attitudes, drive the culture of the procurement supply chain. Some of these
suppliers are involved with determining the future development of Letšeng through the Underground Feasibility Study.
Suppliers and business partners care about:
• fair payment terms;
• local procurement opportunities; and
• responsible environmental and social practices.
In 2022, we received notifications from several suppliers regarding price increases due to the current inflationary environment
and supply chain pressures.
Letšeng’s mining contractor is Matekane Mining Investment Corporation Proprietary Limited (MMIC) and has been since 2006.
MMIC is wholly owned and controlled by Ntsokoane Samuel Matekane, who became Prime Minister of Lesotho following the
national elections in October 2022. The contract is due to expire in October 2024 and we are considering our options, which may
include a tender process, before the expiry date.
Regulators and government
The Government of the Kingdom of Lesotho is a 30% shareholder in Letšeng. We respect and adhere to regulations in all
countries in which we operate and maintain good relationships with government and regulators. Engagements with regulators
are held as appropriate. We interact with government regularly regarding operational challenges where support is required,
regarding employment and progress on community initiatives, and to support local and national development priorities.
Government and regulator priorities include:
• responsible environmental and social practices and the health and safety of employees;
• good governance and ethics;
• community relationships and investments;
• local employment and procurement; and
• contribution to Lesotho’s GDP through dividends, royalties and tax contributions.
Following the national elections held in Lesotho in October 2022, a new ruling party and Prime Minister were elected. The new
administration is business-orientated and we look forward to working with them in future to contribute to the growth of
Lesotho’s economy. A number of engagements have already taken place and will continue, as appropriate.
STRATEGIC REPORT
20
OUR STRATEGY
Our strategy aims 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, and
considers our commitment to creating social value and serving as
custodians of the natural resources of the countries in which we
operate.
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
2022 STRATEGY REVIEW
In November 2022, the Board and executive leadership reviewed the strategy against our context of current macro, industry and
operational conditions and their effect on the diamond market, industry peers and our operations. We assessed the various
potential opportunities to enhance shareholder value, including technologies, diversification across assets, potential
partnerships, and operating structures.
Our medium and long-term strategic objectives remain unchanged and the business models remain appropriate to achieve
these objectives. Our flexibility in adjusting 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-value
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 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 continuous monitoring and
redesign of blasting practices and patterns as appropriate, improving the front end
crushing circuits, and ensuring a consistent and stable feed to the concentration and
recovery circuits of the plants.
The tables below further define our strategic objectives and link them to relevant KPIs and targets. More information is included
in the CEO review on page 46, the CFO review on page 49, and the Operations Review on page 56.
Presenting the Gem
Diamonds Annual Report
and Accounts 2022
Strategic
report
Performance
review Governance
Directors’
report
Financial
statements
Report on
payments to
governments
Additional
information
Gem Diamonds Limited Annual Report and Accounts 21
1. Extracting Maximum Value from Our Operations
What this objective entails KPIs related to the objective
• Optimise the operating model
• Reduce diamond damage
• Embed a culture of continuous improvement
• Underlying EBITDA
1
• Return on average capital employed
• Basic earnings per share
• Cash generated from operating activities
• Ore tonnes treated and carats recovered
• >20 carat diamond recoveries
• Average US$ per carat achieved
2022 performance
Despite experiencing significant electricity disruptions due to load shedding in 2022, Letšeng was able to operate on diesel
generators without material disruption. Letšeng’s improved mine waste dumping strategy and reduced hauling distances,
implemented in 2021, were further improved in 2022, resulting in a measurable reduction in diesel consumption and
associated costs and carbon emissions. This initiative partially offset the additional costs related to the significant increase in
diesel price.
Cash generated from operating activities amounted to US$63.0 million, notwithstanding the challenges experienced with
increased costs and severe inflation. Partnership agreements with strategic manufacturers generated an additional
US$0.3 million revenue from the polished uplift on the sale of these diamonds. In 2022, we entered into an agreement with two
important diamond manufacturing clients who will to supply polished diamonds to some of the world’s most premium luxury
brands. These diamonds are polished to the specifications of the luxury brands and additional value is realised for the Group as
it shares in a percentage of the sales price of the resultant polished diamonds with diamonds. Additional revenue from this
agreement is expected in 2023.
US$ per carat achieved
2 131
1 637
1 908
1 835
1 755
2018 2019 2020 2021 2022
Underlying EBITDA (US$
millions)
88
41
53
57
44
2018 2019 2020 2021 2022
Return on average capital
employed (%)
21
7
12
14
11
2018 2019 2020 2021 2022
Basic earnings per share
(BPS) (pre-exceptional
items) (US cents)
22.9
5.1
9.8
10.5
7.3
2018 2019 2020 2021 2022
Cash generated from
operating activities (US$
million)
138
56
96
71
63
2018 2019 2020 2021 2022
Ore tonnes treated
(millions)
6.5
6.7
5.4
6.2
5.5
2018 2019 2020 2021 2022
Carats recovered
(thousands)
127
114
101
115
107
2018 2019 2020 2021 2022
>20 carat recoveries
257
252
262
225
199
2018 2019 2020 2021 2022
Revenue (US$ million)
267
182
190
202
189
2018 2019 2020 2021 2022
STRATEGIC REPORT
22
1 Refer Note 4, Operating profit on page 177 for the definition of non-GAAP (Generally Accepted Accounting Principles) measures.
2. Working Responsibly and Maintaining Our Social Licence
What this objective entails KPIs related to the objective
Embed a culture of zero harm and responsible care for our
workforce, PACs and environment, and drive the six priority UN
SDGs the Group has adopted:
• No poverty
• Good health and well-being
• Clean water and sanitation
• Decent work and economic growth
• Reduced inequalities
• Responsible consumption and production
• Zero fatalities
• LTIFR
1
• AIFR
1
• Zero major environmental or stakeholder incidents
• Zero significant tailings storage facility breaches
• Sustainability legal compliance
• Community investment
• ISO certifications
1
Measures the safety performance of the Group (including contractors) and is expressed as a frequency rate per 200 000 man hours.
2022 performance
Zero fatalities were recorded during 2022. The Group recorded three LTIs, and the Group’s AIFR and LTIFR improved year on
year.
There were no major or significant environmental or stakeholder incidents during the year.
We continue to invest in PACs and strengthen our relationships with community members. Our sustainability strategy and
maintaining our social licence to operate are of the utmost importance to the Group. We are proud that Gem Diamonds won
three awards at the Investing in African Mining Indaba Junior ESG Awards in May 2022, in the categories of Health and Safety,
Responsible Water and Protection of Biodiversity; and in February 2023 again won the award for Water (management and
prevention of pollution). These awards recognise the work we do to deliver on our commitment to the environment, our
workforce and PACs. Refer to the Sustainability section on page 64 for more information on our social licence to operate.
Letšeng achieved ISO 14001 and ISO 45001 recertification in 2022. Our tailings storage facility management code of practice is
aligned to the ICMM's GISTM, with 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. In addition, we commissioned internal and external experts to assess the possibly of a dam failure at our tailings
storage facilities and freshwater dam, and no material findings were made.
The Group continues to participate in the GIA’s blockchain initiative by submitting certain of our rough diamonds to undergo
its Rough Diamond Analysis Service. The number of diamonds submitted has decreased following the closing of the GIA
laboratory in Antwerp. The GIA collects data and images of rough diamonds and uses individual markers and data identified
during the analysis to scientifically match polished diamonds to their original rough diamonds, which enables it to confirm a
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.
Fatalities
0
1
0 0 0
2018 2019 2020 2021 2022
LTIFR
0.15
0.28
0.04
0.24
0.13
2018 2019 2020 2021 2022
All injury frequency rate
(AIFR)
1.45
0.93
0.76
0.93
0.70
2018 2019 2020 2021 2022
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Gem Diamonds Limited Annual Report and Accounts 23
3. Preparing for Our Future
What this objective entails KPIs related to the objective
• Advance innovative technologies focusing on reducing
diamond damage and costs
• Assess external growth opportunities
• Long-term mine planning and optimisation
• Capital expenditure
• Waste tonnes mined
• Extending life of mine
• Mining in accordance with life of mine plan
• Mergers and acquisitions
2022 performance
We regularly assess external growth opportunities, including promising green and brownfields operations. At present, we are
analysing several assets and will communicate with the market should any further discussions materialise.
In 2022, we began implementing the revised long-term mine plan for Letšeng, which was approved in 2021. We commissioned
a comprehensive Underground Feasibility Study to provide details of the financial viability and method of mining for the
underground expansion of the Satellite pipe. The initial results look promising. Further details of this study can be found in the
Operations review.
In 2022, the surface miner trials continued at Letšeng. The technology presents a potentially diamond-friendly method of
breaking the rock while providing better fragmented material for feeding to the plants and thereby increasing plant
throughput. The incorporation of a surface miner into Letšeng’s mining method for the Satellite pipe is being considered and
discussions with various surface miner suppliers and mining contractors have commenced.
An Energy and Decarbonisation Committee was established in 2022. This management committee is responsible for
identifying, assessing and implementing energy-related opportunities to improve energy security. During 2022, we
implemented an energy use efficiency programme aimed at reducing energy consumption and improving energy use
efficiencies. The Committee also drives focus on opportunities for decarbonisation across the value chain and will measure and
assess progress made in achieving the Group’s decarbonisation strategy.
Towards the end of 2022, we commenced a comprehensive power usage study at Letšeng to review and assess viable
renewable energy sources.
In 2022, we embarked on the second phase of our three-year TCFD adoption strategy. This included the adoption of a
decarbonisation strategy and carbon-pricing model, augmenting our climate-related Board and management structures, and
implementing initiatives to improve resource use efficiencies. We believe that our adoption of the TCFD will ensure that we can
plan for and mitigate the impact of climate change risks on our business. Read more on page 25.
Capital expenditure (US$
million)
23
10
2
4
12
2018 2019 2020 2021 2022
Waste tonnes mined
(millions)
26
24
16
19
10
2018 2019 2020 2021 2022
STRATEGIC REPORT
24
OUR APPROACH TO
CLIMATE CHANGE
OUR APPROACH TO CLIMATE CHANGE
Gem Diamonds is committed to responsible, safe and sustainable mining. In support of this commitment, the Board officially
adopted the TCFD framework in June 2021, with a three-year TCFD adoption roadmap (outlined below). With completion of the
objectives in phases 1 and 2 in 2021 and 2022 respectively, we remain on target to achieve full TCFD adoption by the end of
2023.
In early 2023, the Group committed to a 30% reduction of its Scope 1 and 2 emissions by 2030. This commitment followed the
Board’s adoption in 2022 of the Gem Diamonds Group decarbonisation strategy, which sets out our ambitions to reduce energy
consumption, improve our energy use efficiency and transition to renewable energy sources. This strategy is underpinned by our
carbon-pricing model.
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
Identify climate-related opportunities
available to the Group and establish clear
metrics and targets for decarbonisation
Monitor and manage our climate-related
exposure and measure this against our
decarbonisation targets
Completed Completed On track
2022 HIGHLIGHTS
Decarbonisation strategy finalised
and adopted by the Board
Carbon-pricing model completed and
adopted by the Board
Set target of 30% Scope 1 and 2
emissions reduction by 2030
Achieved 41 036 tonnes of carbon
dioxide equivalent (tCO
2
e) annual
reduction in Scope 1, 2 and 3
emissions
Implemented initiatives to improve
energy use efficiencies and reduce
energy use
Won the Best Climate-Related
Reporting (Small Cap) award at the
ESG Investing Awards 2022 for Our
Approach to Climate Change 2021
report
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Gem Diamonds Limited Annual Report and Accounts 25
GOVERNANCE
How we govern climate-related risks and opportunities
Board
The Board, supported by the Sustainability and Audit Committees, is ultimately responsible for the governance of climate-related
risks and opportunities, and ensuring that our decarbonisation strategy (to mitigate potential negative impacts on the climate) is
implemented in a manner that is in the best interest of the Group. The Board continues to deepen its understanding of climate-
related physical and transition risks and opportunities.
To ensure effective oversight, the Board and relevant Committees receive regular updates on climate change-related matters and
the progress made in adopting the recommendations of the TCFD. The climate change-related data and performance
information presented to the Board and Committees informed the 2022 reviews of the Group strategy, risk management
framework, annual budgets and business plans.
BOARD
Ultimately responsible for the Group strategy, risk and
governance of climate-related risks and opportunities
Top-down approach –
sets the risk appetite and
tolerances, strategic objectives and
accountability for the management
of the framework
AUDIT COMMITTEE
Reviews and monitors matters concerning strategy and
governance and reports to the Board on these issues
SUSTAINABILITY COMMITTEE
Reviews matters regarding existing and planned
metrics and targets, and performance and operational
objectives
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
ENERGY AND DECARBONISATION COMMITTEE
(EDC)
Management forum responsible for identifying,
assessing and overseeing the implementing of energy-
related opportunities to improve energy security and
access to renewable energy sources
Drives focus on opportunities for decarbonisation
across the value chain
Bottom-up approach –
ensures a sound risk management
process and establishes formal
reporting structures
Management
The Group COO has overall executive accountability for sustainability, including climate-related issues, decarbonisation and
energy-related matters. The COO acts upon the most material risks and opportunities to successfully transition business models
for maximum benefit. The Group CFO holds overall executive accountability for integrating climate-related issues into annual
budgets, business plans, financial disclosures and risk management.
Gem Diamonds established the TCFD Adoption Steering Committee and the EDC to support climate-related work. These
Committees work with the relevant internal functions (enterprise risk management, communication and reporting, insurance,
financial planning and disclosure, project management, internal audit, engineering and mining and treatment) to bolster the
integration of climate change, energy and decarbonisation considerations throughout the business. The Committees report to
the Gem Diamonds and Letšeng Boards and their respective Audit and Sustainability Committees quarterly.
STRATEGIC REPORT
26
The TCFD Adoption Steering Committee is a management committee responsible for ensuring that climate change-related risks
and opportunities are appropriately identified, evaluated and elevated through established governance and risk mitigation
structures.
The Committee meets monthly. It comprises the CFO, COO, Group Financial Controller, Health, Safety, Social and Environment
(HSSE) and Sustainability Manager, and Letšeng’s Head of Operations and Head of Finance. Internal and external attendees are
invited to provide input as appropriate.
The EDC is a management committee responsible for identifying, assessing and overseeing the implementation of energy-
related opportunities to improve energy security and access to renewable energy sources. The Committee drives focus on
opportunities for decarbonisation across the value chain and will measure and assess progress made in achieving the Group’s
decarbonisation strategy.
The EDC meets twice a month. It comprises the COO, Senior Manager: Technical and Projects, HSSE and Sustainability Manager,
and Letšeng’s Head of Operations and Head of Finance.
Climate education and training
Climate science is constantly evolving. As the Board navigates the Group’s transition to a low-carbon economy, it is imperative
that the Board continually improves and updates its knowledge, understanding and skills in this field. The Board takes a longer-
term view to ensure the Group’s strategy is appropriate for long-term success.
Management is responsible for identifying and responding to emerging climate-related risks and opportunities. Management
should understand these risks and opportunities to ensure that appropriate levels of mitigation are developed and responsibly
elevated through established governance structures, as appropriate.
In 2022, the Board and senior management received regular climate-related training, including attending workshops on carbon
pricing, decarbonisation and ESG risk. Climate change knowledge-building workshops for heads of departments and senior
management took place during climate-specific working sessions at departmental level. These workshops focused on resource
consumption, operational optimisation and decarbonisation initiatives.
Gem Diamonds adopted a bottom-up approach to embed decarbonisation awareness across the Group, with a series of
workshops and presentations to explain the concept of carbon footprint and importance of carbon reduction to employees.
In 2022, Gem Diamonds joined the United Nations Global Compact (UNGC) initiative, a voluntary leadership platform for
developing, implementing and disclosing responsible business practices in alignment with the UN’s development principles and
SDGs. The Group COO and HSSE and Sustainability Manager completed the six-month UNGC Climate Ambition Accelerator
programme.
The Climate Ambition Accelerator programme equips companies with knowledge and skills to accelerate progress towards
setting science-based emissions reduction targets aligned with the 1.5°C pathway. The learnings from this programme were
integrated into the Group decarbonisation strategy.
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Gem Diamonds Limited Annual Report and Accounts 27
STRATEGY
The impacts of climate-related risks and opportunities on our
businesses, strategy and financial planning
Our Group strategy to sustainably maximise stakeholder value goes hand in hand with our commitment to be responsible
stewards of our natural resources. Gem Diamonds identified three strategic priorities that underpin how the Group creates value
for our stakeholders. We believe that effective management of climate-related matters contributes to the Group’s performance
within these priorities.
Strategic priorities
Extracting Maximum Value from Our
Operations
Working Responsibly and Maintaining
Our Social Licence
Preparing for
Our Future
Climate considerations
Operational initiatives will improve
efficiencies, thereby reducing operating
costs and ensuring future availability of
resources for all stakeholders
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
The Group’s existing business
continuity and disaster management
plans include considerations for
natural weather events, which we have
successfully managed at our
operations for many years
2022 integration
• Our focused waste rock dumping
strategy was further improved in 2022
and resulted in even shorter hauling
distances, which reduced costs, fossil
fuel consumption and associated
carbon emissions
• We began steepening the pit walls in
the Main pit in 2022, which reduced
the volumes of waste rock to be
moved, eliminating associated costs,
fossil fuel consumption and carbon
emissions
• We piloted an energy prioritisation
schedule to reduce energy demand
• We completed a climate-related risk
exposure assessment
• We worked with PACs to provide water
and sanitation infrastructure
• We developed a climate-pricing
model for use in life of mine
planning and to evaluate future
optimisation projects
• The Board approved our
decarbonisation strategy
• We set a target of 30% Scope 1 and
2 emissions reduction by 2030
• We established the EDC to drive our
decarbonisation strategy and
projects
Decarbonisation strategy
The Board’s adoption of the TCFD framework in June 2021 included a commitment to adopt a decarbonisation strategy by March
2023, with implementation to commence in 2023. Decarbonisation reduces anthropogenic carbon emissions through reduced
resource consumption and the implementation of lower carbon and renewable energy sources, and is a key factor in meeting
our climate change commitments.
The Group adopted a bottom-up approach to identify decarbonisation risks and opportunities and consider potential
implementation pathways for resource use efficiency and carbon-reduction initiatives. We held decarbonisation workshops with
specific operational teams throughout 2022 to identify initiatives that could support the Group’s decarbonisation objectives
through improved resource use efficiencies, lower carbon emissions and reduced operational costs. These workshops informed
our decarbonisation strategy, in which we commit to a 30% Scope 1 and 2 emissions reduction by 2030. This is equivalent to a
reduction of 39 044 tC
2
Oe using our 2021 emissions footprint as a baseline.
Following extensive decarbonisation workshops, the strategy and supporting initiatives were evaluated internally and externally
by carbon and energy experts. Further workshops were held with the Board to consider the decarbonisation strategy for final
approval in March 2023.
We are aware of the importance of committing to practical, enforceable and realistic decarbonisation targets. We will use our
2021 carbon footprint as a baseline and will regularly communicate our progress against this commitment, which is aligned with
internal performance metrics, including specific key performance indicators and remuneration. Our baseline will be re-evaluated
should there be any material change to our organisational or operational structure (for example, acquisition or disposal of
assets).
STRATEGIC REPORT
28
Our decarbonisation levers
In 2022, our Scope 1 and 2 carbon footprint comprised 49% direct Scope 1 emissions (2021: 48%) and 51% indirect Scope 2
emissions (2021: 52%). Currently, the Group targets both Scope 1 and Scope 2 emissions as part of our decarbonisation strategy
and our 30% reduction by 2030 objective.
Letšeng draws its power from the South African power grid, supplied through the national power utility, Eskom. A 2021 study by
the Centre for Research on Energy and Clean Air found Eskom to be the world’s most polluting company. This is as a result of
Eskom’s 15 coal-fired power stations, which produce 80% of the country’s power. Eskom-supplied grid electricity is currently the
only grid power that Letšeng has access to and accounts for all our Scope 2 emissions. As of 2022, no renewable or alternative
electricity sources are available to Letšeng to replace the existing grid-supplied electricity. Mobile (mining fleet and equipment)
and stationary (diesel-powered generators) combustion activities account for 98% of our Scope 1 emissions as a result of the
diesel consumed through these activities.
The Gem Diamonds decarbonisation strategy focuses primarily on Letšeng, which represents 98% of the Group’s carbon
footprint. Our strategy targets two key levers for reduced carbon emissions within both Scope 1 and 2, to:
• reduce our energy use and associated carbon emissions by improving the efficiency of our processes and equipment; and
• replace our dependence on fossil fuel-based energy sources with lower-carbon and renewable energy sources.
Reducing the overall demand for energy means that implementing renewable energy sources and offsetting residual emissions
becomes as efficient and cost-effective as possible.
We are assessing and implementing initiatives to progressively switch to lower-carbon and renewable energy sources. Since
2021, Gem Diamonds has commissioned independent energy and carbon subject matter experts to identify opportunities to
improve energy efficiency and reduce the energy use associated with Scope 1 and 2 emissions. These studies provided valuable
insight to inform how we define and implement our decarbonisation strategy.
What we learnt How we responded
Scope 1 The extremely low temperatures at Letšeng
eliminate the possibility of biodiesel to replace
traditional mineral diesel. This is because
biodiesel thickens in the fuel systems of the
mining fleet and equipment at low
temperatures.
We are assessing alternative energy sources for
our mining fleet and equipment that could
potentially replace traditional diesel combustion
engines in the future.
Frequent load shedding has increased the use of
generators at Letšeng. These energy
interruptions are potentially damaging and
costly as machinery must shut down safely and
not mid-use. Restarting machinery also
consumes more power and increases the risk of
damaging equipment.
We ensure that load shedding schedules are
integrated into our production planning to
facilitate an effective changeover to generator
power. In the short term, we are assessing lower-
carbon energy for our generators.
Scope 2 The remaining life of open pit mining at our
Letšeng operation impacts the feasibility of any
capital-intensive projects.
We commissioned a study to assess the
possibility of hybrid power solutions and
partnerships to bolster the viability of large-scale
renewable energy projects.
The Letšeng mine operates in a region that is
protected as a nesting zone for endangered
vultures. As a result, traditional turbine-driven
wind power development is not possible within
a 40km radius of the mine.
We are assessing bird-friendly wind power
technology that poses no danger to endangered
or other bird species in the region.
The location-specific irradiance of the Letšeng
mine indicates that a maximum of 5.5 hours a
day are available for energy yield through solar
photovoltaics.
We commissioned a study to assess the viability
of solar power as part of a hybrid model that
includes other renewable energy sources.
Energy demand reduction and decarbonisation initiatives
Our carbon footprint analysis at Letšeng showed that we successfully reduced our comparative carbon footprint and associated
intensity indicators during the reporting period. The reduction is mainly due to mining optimisation initiatives that reduced the
volume of waste mining, including a 30% reduction in haulage distances.
At our Group sustainability and decarbonisation workshop, we selected projects and initiatives to form part of our operational
and Group decarbonisation strategy. In 2022, as part of our ongoing efforts to reduce energy-related emissions and costs, the
Group implemented a number of initiatives that positively impacted our carbon footprint:
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By optimising heating systems, we
reduced 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 on-site accommodation
facilities by 28%
The Letšeng operation implemented
an ISO 50001-aligned energy
management system that further
informs the operational approach to
manage, track and protect energy
supply, and track and minimise
energy consumption
We further reduced our waste rock
hauling distances, resulting in a
reduction of our carbon emissions and
diesel consumption
We implemented a focused behaviour-
based training programme to create
awareness of the impact each employee
has on energy consumption
We commissioned a site-wide
lighting energy assessment and
adopted a strategy to replace all
lighting infrastructure on site with
energy-efficient or renewable
technology
Working towards a just transition
Our decarbonisation strategy considers the socio-economic environment in Lesotho and the well-being of our workforce and
surrounding communities. We acknowledge the importance of a just transition from fossil fuel reliance, and we intend to target
decarbonisation projects that take into consideration economic, societal and climate impacts.
Carbon pricing
Internal carbon pricing is a globally recognised tool to guide decision-making when assessing climate change impacts and risks
and opportunities, by forecasting a future world under various climate change scenarios.
Companies that adopt an internal price on carbon are better able to integrate the impact of climate change into their business
strategy and planning. Gem Diamonds’ adoption of an internal carbon-pricing model in August 2022 set the basis for our
decarbonisation strategy.
Our shadow price carbon-pricing model (a method of investment analysis that adds a hypothetical surcharge to the price of
projects that involved the creation of carbon emissions) considers our climate change scenario planning work and assigns prices
based on current and potential future global responses associated with various changes in global temperature. Inputs into our
carbon-pricing model include a potential future carbon tax, technology development and deployment, coal-powered energy
divestiture, fossil fuel pricing increases and location-specific regulation.
Our carbon-pricing model exposes otherwise potentially hidden impacts of climate-related risks (for example, a potential future
carbon tax and the cost of a just transition from fossil fuels) and opportunities (for example, renewable energy viability). It
supports strategic decision-making related to future capital investments in a just transition, and lower-carbon and renewable
energy options. There is uncertainty of the cost and timing of implementation of carbon-related taxes. Carbon pricing is built into
our future project planning to appropriately analyse potential investments under different hypothetical scenarios. Management
and the Board will continue to assess the potential impacts of carbon-related taxes as the information becomes more certain.
The UNGC called for businesses to adopt an internal carbon price of at least US$100/tCO
2
e by 2020, to keep greenhouse gas
(GHG) emissions consistent with a 1.5°C to 2°C pathway.
Following a science-based climate change scenario analysis, Gem Diamonds adopted the following shadow carbon prices as
inputs into our carbon-pricing model:
• US$102.49 per tonne for carbon emissions before 2030; and
• US$159.75 per tonne for carbon emissions after 2030.
Gem Diamonds is currently not subject to any carbon taxes as these taxes have not been imposed in any of the jurisdictions in
which the Group operates.
For information on carbon pricing and the Gem Diamonds model, refer to Our Approach to Climate Change Half-Year Report
2022.
STRATEGIC REPORT
30
RISK MANAGEMENT
How we identify, assess and manage climate-related risks
Gem Diamonds has a robust risk management process and framework to identify, assess, 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. It ensures that all material 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 timeframes.
In 2022, we worked with experts in insurance, decarbonisation, energy and climate change to identify emerging risks and
potential opportunities for improvement or mitigation, with the aim of assessing our readiness for responding to these. Our
collaboration with external experts enabled us to bolster our organisational system readiness and plan appropriately for the
mitigation of future risks to the business.
• 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, strategic and business planning impacts, which
are presented to the Board during quarterly risk meetings.
• The Sustainability Committee assures the Board that appropriate
systems are in place to identify and manage climate-related HSSE
impacts.
• The Sustainability Committee oversees energy and decarbonisation
risks and opportunities, and monitors performance against carbon
and water footprint parameters.
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 in quarterly meetings to the Audit and Sustainability
Committees and, ultimately, to the Board for approval.
• Emerging and existing regulatory requirements related to climate
change issues are monitored and addressed by the Audit and
Sustainability Committees. The HSSE and Sustainability Manager
attends these meetings by invitation.
• Through the EDC, management assesses energy and
decarbonisation risks and opportunities. Progress against risk
mitigation opportunity improvement plans are presented to the
Sustainability Committee.
• 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 and
mitigation measures to be implemented. These are presented to the
Board at the quarterly risk review meetings.
• Approved risk management plans are implemented by
management at Group and operational level. This is monitored and
managed through TCFD Adoption Steering Committee meetings,
EDC meetings, quarterly technical reviews, management risk
workshops, quarterly risk reviews, and Board and Committee
meetings.
Bottom-up
approach –
Management
EDC
TCFD Adoption
Steering Committee
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Physical and transitional risk exposure assessments
In 2022, we expanded on the comprehensive physical and transition risk exposure assessments we conducted in 2021,
determining the materiality of potential impacts on financial performance and position. We took a science-based approach to
identify potential exposure events associated with our climate-related risks and materialisation, enabling us to better plan for
their management, mitigation and financial impact.
Climate-related transition risks are incorporated into our risk management framework. Our resilience to physical climate-related
risks is robust, and we continue to improve our understanding of the potential physical risks under various future scenarios.
The table below provides a high-level overview of some of the Group’s climate-related risks and opportunities.
Climate-related risks Potential financial impact
Climate-related
opportunities
Potential financial impact
Short term: 1 to 3 years
Short-term processes include annual business and financial planning, performance reporting, short-term capital allocation and
contract negotiations.
• Increase in occurrence of
moderate precipitation
• Enhanced emissions
reporting obligations
• Enhanced ESG obligations
• Increased operating costs
• Increased capital
investment
• 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 to 5 years; long term: 5 to 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 frequency and
duration of droughts
• Failure of electricity
providers to move to a low-
carbon economy
• Substitution of technology
with lower-emission
alternatives
• Social risks due to resource
constraints, particularly in
developing countries
• Evolving regulatory context
regarding carbon tax
• Increased costs of carbon-
intensive products (such as
diesel)
• Reputational risk
• Increased capital
investment
• Increased operating cost
• Reduced revenue from
decreased production
capacity
• Increased insurance
premium or insurance
unavailability
• Research, development and
implementation costs of
new technology
• Inappropriate investment
decisions
• Identify opportunities to
transition to renewable
energy sources
• Position Gem Diamonds as
an ethical and responsible
producer of low-carbon-
footprint diamonds
• Use of new technologies
• Reduced exposure to
carbon and fossil fuel
pricing
• Increased capital availability
• Reputational benefits
• Decreased operating costs
• Increased capital
investment
STRATEGIC REPORT
32
TARGETS AND METRICS
The targets and metrics used to assess and manage relevant
climate-related risksand opportunities
The Group monitors various metrics to inform its assessment of climate-related risks and opportunities.
In 2022, we increased the frequency of our carbon and water footprint assessments from once a year to every six months. This
provides shorter-term monitoring and control of our progress against our set goals and the associated risks and opportunities,
and allows us to respond sooner to climate and energy-related matters such as consumption rates, carbon emission trends and
opportunities to improve usage efficiencies.
The following metrics and trends are measured and monitored as part of our normal operations:
• Carbon footprint
• Water footprint
• Freshwater dam levels
• Precipitation patterns
• Energy consumption trends
• Environmental expenditure
• Land use and rehabilitation activities
For more information on our carbon emissions, including Scope 1, 2 and 3 emissions and other climate-related metrics, refer to
Our Sustainability Report 2022.
Our carbon, energy and water footprints
Carbon
The Gem Diamonds' carbon footprint is calculated in accordance with the GHG Protocol Corporate Accounting and Reporting
Standard, an accounting tool developed by the World Resources Institute and the Business Council for Sustainable Development
to manage GHG emissions. The standard includes Intergovernmental Panel on Climate Change GHG inventory guidelines for
specific heating values, carbon content, densities and emission factors.
Our total 2022 carbon footprint for the Group was 112 827 tCO
2
e (2021: 153 863 tCO
2
e). This includes direct carbon emissions
(Scope 1), energy indirect carbon emissions (Scope 2) and material Scope 3 emissions.
The reduction of the Group’s carbon footprint can be attributed to a reduction in the volume of tonnes mined and treated in
accordance with the mine plan at Letšeng, mining optimisation initiatives, improved energy demand management and
scheduling, implementation of energy efficiency workstreams, and load shedding of the South African power grid.
Mining optimisation initiatives implemented during 2021, such as reduced hauling distances, steeper slopes and reduced
mineral waste mining were further improved during 2022. Relooking these initiatives to assess and implement further
improvement opportunities not only contributed to a reduced carbon footprint, but also mitigated the impact of significantly
increased diesel prices during 2022. The 2022 period also saw increased reliance on diesel-powered generators to power the
Letšeng operations due to the increased impact of load shedding of the South African grid, which feeds the Letšeng mine.
In 2022, the South African grid was affected by load shedding on 207 days, up from 75 days in 2021 and 54 days in 2020. The
ever-increasing instability of South Africa’s Eskom grid, from which the grid power for our Letšeng mine is sourced, resulted in
significantly increased reliance on our diesel-powered generators to power the mining operations. As a result of load shedding,
the Letšeng operation recorded a 242% year on year increase in carbon emissions related to stationary combustion (reliance on
generators), while recording a 27% decrease in carbon emissions related to mobile combustion (driven by mining activities). The
27% reduction of mobile combustion-related emissions can be attributed to mining optimisation initiatives and lower volumes
of material mined in 2022, in line with the mine plan.
Letšeng carbon emissions related to diesel consumption (tCO
2
e) 2022 2021 % change
Diesel: Mobile combustion 38 035 52 410 (27)
Diesel: Stationary combustion 8 667 3 587 242
Total emissions related to diesel consumption
46 702 56 939 (18)
The Group monitors intensity indicators to assess and appropriately respond to carbon emission changes. Although our
emissions intensity for tonnes mined (ore and waste) increased slightly in 2022, this is directly related to the significant reduction
in waste tonnes mined being offset by a relatively smaller reduction in overall emissions. However, our intensity indicators for
tonnes treated showed an improvement from 2021 to 2022, largely as a result of the decarbonisation initiatives implemented.
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Carbon emissions Unit 2022 2021 2020
Scope 1 (direct)
tCO
2
e 48 219 62 672 53 568
Scope 2 (indirect)
tCO
2
e 51 092 67 473 61 320
Total Scope 1 and 2
tCO
2
e 99 311 130 145 114 888
Scope 3 (indirect) tCO
2
e 13 516 23 718 20 807
Total Scope 1, 2 and 3
tCO
2
e 112 827 153 863 135 695
Total tonnes mined (ore and waste) tonnes 15 886 339 24 395 986 21 167 606
Ore tonnes treated tonnes 5 506 576 6 172 428 5 436 396
Intensity indicator: Scope 1 and 2 (tCO
2
e)/tonnes mined (ore
and waste) ratio 0.006 0.005 0.005
Intensity indicator: Scope 1 and 2 (tCO
2
e)/tonnes ore
treated ratio 0.018 0.021 0.021
The Group will continue to measure and report on our carbon footprint performance as we work towards our goal of reducing
our footprint by 30% by 2030, using 2021 as a base.
Energy
Group-wide energy consumption (for Scope 1 and 2 activities) in 2022 was 219.6 million kWh (2021: 320.4 million kWh). 99% of
Scope 1 and 2 energy consumption in 2022 is attributable to Letšeng, where our principal energy sources are grid electricity and
diesel. The reduction in the Scope 1 and 2 energy consumption resulted in an improvement of energy use efficiencies for ore
tonnes treated (see the table below). This illustrates an improvement in energy consumption across the value chain, from mining
to treated production. The increase in energy intensity for tonnes mined is primarily driven by the significant reduction in waste
tonnes mined as the actual energy consumption for both Scope 1 and 2 reduced by 100.8 million kWh in 2022 from 2021.
Energy consumption Unit
2022 2021 2020
Scope 1 kWh
167 643 889 251 743 229 215 725 348
Scope 2 kWh
51 975 278 68 637 800 62 378 253
Total Scope 1 and 2 kWh
219 619 000 320 381 000 278 103 000
Total tonnes mined (ore and waste) tonnes
15 886 339 24 395 986 21 167 606
Ore tonnes treated tonnes
5 506 576 6 172 428 5 436 396
Intensity indicator: kWh/Tonnes mined (ore and waste) ratio
13.82 13.13 13.14
Intensity indicator: kWh/Tonnes ore treated ratio
39.88 51.91 51.16
STRATEGIC REPORT
34
Water
Scientists warn that most people will be forced to live with severe pressure on fresh water supply within the next two
generations as a result of over-use and climate change. The Group continues to deepen our understanding of water-related risks
and opportunities at our operations. Until the start of 2021, Letšeng faced an extended four-year drought, prompting the
operation to assess further water use reduction and recycling initiatives. During 2022, Letšeng also implemented a number of
plans focused on water stewardship, including:
• improving site-wide stormwater management to minimise the potential flow of water in mining areas and to maximise the
flow to our clean water dam;
• improving the pit dewatering system to reduce the water-residency time in the pits;
• adopting a “closed-loop” return water system from our tailings facility (Patiseng) for return water required for processing
activities; and
• implementing improved water treatment methodologies.
These initiatives reduce the volume of fresh water consumed by the Letšeng operation and ensure water quality is protected
through focused engineering controls.
In 2022, Lesotho received significant rainfall, recharging our freshwater storage facility. The water currently held in the Mothusi
freshwater facility ensures adequate water supply, at current usage rates, for the next nine years. The implementation of water
stewardship initiatives resulted in a 54% decrease in our Group-wide net water usage and a 61% decrease in water withdrawal.
We recycled 6.4 million m
3
of water, reduced the net water consumed across the value chain by 48% for treated ore, and
improved our recycled water usage for treated ore by 19%.
The management of our response to more dynamic weather patterns will continue to evolve alongside our understanding of the
impacts of climate change.
Water consumption Unit
2022 2021 2020
Net water usage
million m
3
3.3 7.1 6.0
Water withdrawal and capture
million m
3
1.5 3.8 3.5
Water recycled
million m
3
6.4 8.9 8.8
Water loss through evaporation, entrainment, and seepage
million m
3
3.6 3.1 3.2
Total tonnes mined (ore and waste) tonnes
15 886 339 24 395 986 21 167 606
Ore tonnes treated tonnes
5 506 576 6 172 428 5 436 396
Net water use (m
3
)/Tonnes mined (ore and waste)
ratio
0.21 0.29 0.28
Net water use (m
3
)/Tonnes ore treated
ratio
0.60 1.15 1.10
Recycled water (m
3
)/Tonnes mined (ore and waste)
ratio
0.40 0.36 0.42
Recycled water (m
3
)/Tonnes ore treated
ratio
1.16 1.44 1.62
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RISK MANAGEMENT
HOW WE APPROACH RISK
The Group’s risk management framework, which is fully integrated with strategic and operational planning, aims to identify,
manage and respond to the Group’s risks and uncertainties. The framework combines top-down and bottom-up approaches
with appropriate governance and oversight.
Risk management framework
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 –
the Board sets the risk
appetite and tolerances,
strategic objectives and
accountability for the
management of the
framework
Audit 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.
Sustainability Committee
The Sustainability Committee
provides assurance to the
Board that appropriate systems
are in place to identify and
manage health, safety, social,
environmental and climate
change-related risks. It
monitors the Group’s
performance within these
categories and drives proactive
risk mitigation strategies to
secure safe and responsible
operations and our 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
The Board is ultimately responsible and accountable for the Group’s risk management function. It is supported by its
subcommittees and senior management to oversee the Group’s most relevant and significant current and emerging risks. These
include strategic, operational and external risks. These risks are actively identified, assessed, prioritised, managed and mitigated
as much as reasonably possible, as they could negatively impact the Group’s ability to execute its strategy.
While the Group’s risk management framework focuses on risk identification and mitigation, many of the factors that give rise to
these risks also present opportunities. Gem Diamonds tracks these opportunities and incorporates them into the strategy where
they appropriately support the Group’s purpose.
The Board and its subcommittees have identified the following key strategic, operational and external risks, which have been set
out in no order of priority.
STRATEGIC REPORT
36
Exposure increased Exposure unchanged Exposure reduced
1. Availability
and
sustainability
of reliable
power supply
Risk: Poor quality of power supply
reduces the available processing
time and negatively influences the
reliability and stability of plant
equipment. Regular power
interruptions result in higher
generator use and compound the
impact of escalated diesel prices
and time between failures, which
in turn increases operating costs.
Opportunity: Improved
efficiencies, reduced costs and
decarbonisation benefits.
Risk response:
• Exploring solutions with the Lesotho
Electricity Company (LEC) for grid
and/or renewable power
• Initiated power usage option study
• Assessing potential to generate
renewable energy for own use
• Established an Energy and
Decarbonisation Committee
• Prioritisation of load and allocation
of power
• Identification and implementation of
consumption reduction initiatives
Risk type: Strategic,
operational and external
Strategic impact: Extracting
Maximum Value from Our
Operations
Preparing for Our Future
Working Responsibly and
Maintaining Our Social
Licence
Business model impact:
Affects the entire business
model.
2. Diamond
resources and
reserves
Risk: Letšeng’s low-grade
orebodies make the operation
sensitive to resource variability.
Inconclusive information on the
geological continuity, distribution,
grade and quality of diamonds
within the orebodies and
variability at depth increases the
risk that production targets will
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 mine planning, 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 estimate geological,
grade and quality continuity
within defined domains, and
improves planning and
forecasting accuracy.
Risk response:
• Gathering geological evidence on
variations within the resource
(lithology, density, volume/tonnage,
grade, diamond population size and
value distribution), applying industry
best practice and engaging
independent experts to audit and
provide advice
• 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 a daily
and monthly basis, as well as per
export period, to follow trends in
diamond distributions, large stone
recovery frequencies and average
diamond prices per kimberlite
domain
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.
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3. Workforce
Risk: Achieving the Group’s
objectives and sustainable growth
depend on the ability to attract
and retain suitably qualified,
experienced and ethical
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 response:
• Human resource 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 bonuses and long-term share
awards
• Remuneration practices are in place
to ensure the Group regularly
reviews current remuneration
policies, skills and succession
planning
• Development of training and
coaching plans to address areas
where skills and experience
shortages are identified, in
conjunction with government
agencies
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.
4. Security of
product
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
could negatively affect revenue
and cash flows.
Related opportunities: Advanced
security control measures increase
employee and product safety and
improve revenue.
Risk response:
• Zero tolerance of non-conformance
to diamond security policies 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 (a
subcommittee of the Letšeng Board)
• Appropriate diamond specie
insurance cover in place
• Vulnerability assessments and
assurance audits conducted by
internal and independent third
parties
Risk type: Strategic and
operational
Strategic impact:
Extracting Maximum Value
from Our Operations
Working Responsibly and
Maintaining Our Social
Licence
Business model impact:
Improves outputs of carats
recovered, which increases
financial outputs. Improves
human capital and safety
outcomes.
5. Variability in
cash
generation
Risk: Variability in cash flows from
operational activities, currency
fluctuations and uncontrollable
cost inflation 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
performance.
Related opportunities:
Cash constraints drive more
efficient capital allocation and
cost discipline.
Consistent and regular cash flows
provide predictability to maintain
an appropriate capital allocation
strategy.
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 variability in the short to
medium term
• Ongoing drive for continuous
improvement to deliver operational
efficiencies
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.
STRATEGIC REPORT
38
6. Information
Technology (IT)
and Operational
Technology (OT)
systems, and
cybersecurity
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 serious production
interruption and a material
adverse impact on the Group.
Related opportunities: Stability
to the business with no
production interruption.
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
• Delivering on the outcomes of the
National Institute of Standards and
Technology’s (NIST) cybersecurity
risk assessment
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.
7. Production
interruption
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. Material
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.
Risk response:
• Continuous review of business
continuity plans
• Bespoke contract management role
in place to ensure proper contract
management and minimise potential
for disputes and disruptions
• Appropriate insurance is maintained
• Appropriate levels of critical
resources maintained (fuel, ore
stockpiles, etc) to mitigate the
impact of any production
interruptions
• Continual improvements in the
management of contractors’
operating practices
Risk type: Operational and
External
Strategic impact:
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.
8. Diamond
damage
Risk: Letšeng’s valuable Type IIa
diamonds are susceptible to
damage during the mining and
ore treatment 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
revenue, cash flow and
profitability.
Risk response:
• Continuous diamond damage
monitoring and analysis to identify
opportunities to reduce diamond
damage
• Adherence to defined blasting and
processing parameters to reduce
possible diamond damage
• Development of early identification
and improved liberation technology
• Evaluating alternative technologies
for reduced diamond damage in the
mining and treatment processes
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.
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9. Health, safety
and wellness
Risk: The probability of a major
health or safety incident occurring
is inherent to mining operations.
These incidences could impact the
well-being of employees, PACs,
our licence to operate, the Group’s
reputation and compliance with
our 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 response:
• Appropriate health and safety
policies and practices are in place
• Corrective actions identified from
incident investigations and internal
and external audits are
implemented timeously
• Dam safety management framework
implemented in alignment with the
ICMM’s GISTM
• ISO 45001 accreditation maintained
• Safety management and leadership
programme; visible felt leadership,
detection and prevention strategies
developed and implemented
• Safety training and awareness
campaigns
• Psychological support
considerations for entire workforce
• Continually assess organisational
safety culture maturity to address
current and emerging issues
• Implement a mine-wide critical
control management strategy
Risk type: Strategic and
operational
Strategic impact:
Extracting Maximum Value
from Our Operations
Working Responsibly and
Maintaining Our Social
Licence
Business model impact:
Affects the entire business
model.
10. 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. The recent election
outcome in Lesotho could result
in new government policies.
Related opportunities: Realising
the Group’s goal to make a
meaningful and sustainable
contribution to the countries in
which we operate builds our
reputation with all stakeholders
including employees,
government, regulators,
communities and investors.
Risk response:
• The implementation of an
appropriate CSI strategy based on a
community needs analysis which
provides infrastructure and 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 all
stakeholders, including government,
regulators, community leadership
and PACs
• Established an Employee
Engagement Committee
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.
STRATEGIC REPORT
40
11. Climate
change
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
to the Group which, if not
identified and managed
responsibly, could negatively
impact the Group’s long-term
operational and financial
resilience.
Opportunity: Opportunities for
improvements in energy
consumption and sustainable
power supply resulting in
operational efficiency,
decarbonisation, and reduction in
costs and potential carbon taxes.
Risk response:
• TCFD adoption and climate change
strategy development
• Adoption of a Group
decarbonisation strategy
• Governance and management
practices implemented
• Structured TCFD Adoption Steering
Committee meetings
• New reporting standards adopted
• Adoption of UN SDG framework
• Carbon emissions monitoring and
reporting
• Drive and monitor the
implementation and benefits
realised from energy and
decarbonisation initiatives through
the Energy and Decarbonisation
Committee
Risk type: Strategic,
operational and external
Strategic impact: Preparing
for Our Future
Working Responsibly and
Maintaining Our Social
Licence
Business model impact:
Affects the entire business
model.
12. Access to
capital
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 returns to
shareholders. The Group currently
relies on a single mine with a finite
life for its revenues, profits and
cash flows.
Related opportunities: Exploit
growth opportunities within
current operations and pursue
other external assets.
Risk response:
The Group’s strategic objectives are to
drive share price growth through:
• Continuous improvement initiatives
• Investigating early diamond
identification and alternative mining
and liberation technology
• Assessing mergers and acquisitions
and diversification opportunities
• Focusing on existing operations to
unlock further value through
rationalisation and efficiency
improvements
Risk type: Strategic
Strategic impact:
Extracting Maximum Value
from Our Operations
Working Responsibly and
Maintaining Our Social
Licence
Preparing for Our Future
Business model impact:
Affects the entire business
model.
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13. Rough
diamond demand
and prices
Risk: Numerous factors beyond
our control could affect the price
and demand for diamonds. These
factors include macro-economic,
political and consumer trends.
Medium to long-term demand is
forecast to outpace supply, but
short-term uncertainty and
liquidity constraints within the
diamond sector may negatively
impact rough diamond pricing.
Related opportunities: Reduced
supply and increased demand
could result in improved revenue,
resulting in positive cash flows.
Risk response:
• Managing our own sales processes
and closely monitoring market
conditions and trends
• Flexibility in sales processes and
utilisation of multiple sales and
marketing channels, and increased
viewing opportunities
• Ability to enter into partnership
agreements to share in the upside of
polished diamonds
• Maintaining the integrity of the
tender process
Risk type: External
Strategic impact:
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.
14. Environmental 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:
• Appropriate sustainability and
environmental policies are in place
and regularly reviewed
• The current behaviour-based care
programme embeds environmental
stewardship
• A dam safety management
framework has been implemented
• Annual social and environmental
management plan audit programme
has been implemented
• ISO 14001 (Environmental
Management) accreditation
maintained
• Adopted a UN SDG framework
• Rehabilitation and closure
management strategy adopted and
updated annually
• Implementation of an integrated
water management framework
• Concurrent rehabilitation strategy
implemented
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.
EMERGING RISKS
The Group risk framework includes an assessment of emerging risks, which considers those risks that:
• are likely to materialise or impact over a longer timeframe than existing risks;
• do not have much reference from prior experience; and
• are likely to be assessed and monitored against vulnerability, velocity and preparedness when determining likelihood and
impact.
The current emerging risks that are being monitored by the Group are:
• lab-grown diamonds attracting a larger market share;
• generational shifts in consumer preferences back to diamonds, as led by social influencers; and
• future workforce (automation, skills for the future, etc).
STRATEGIC REPORT
42
VIABILITY STATEMENT
The Board has assessed the viability of the Group over a period significantly longer than 12 months from the approval of the
financial statements, in accordance with the UK Corporate Governance Code. The Board considers three years from the financial
year end to be the most relevant period for consideration for this assessment, given the Group’s current position and the
potential impact of the principal risks documented on pages 36 to 42 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 CFO 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.
GROUP FACILITIES
The refinancing of the Group’s facilities, which was completed in December 2021, and the new project debt facility for the
replacement of the primary crusher area (PCA), implemented in November 2022, significantly increased the Group’s available
facilities to US$82.6 million, when fully unutilised. US$74.1 million of these facilities mature in December 2024 and US$5.9 million
is a general banking facility with no set expiry date, but which is reviewed annually. The balance of US$2.6 million relates to the
PCA funding which expires in May 2027.
RISING COSTS
The Russian invasion of Ukraine caused extreme global uncertainty which resulted in increased diesel and explosives prices
experienced during the year. This had a direct impact on costs due to the large volumes of diesel used in the loading and hauling
of ore and waste tonnes. In addition, the cost of running the treatment plants increased as the diesel-run generators were used
for extended periods due to the electricity grid disruptions experienced in South Africa, the primary source of electricity for
Letšeng. The Group has seen a slight reduction in the diesel price during the first two months of 2023.
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 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, are similar to its current operating conditions. The operation is therefore
well geared to manage these conditions within its current and medium-term operational activities, cost structure and business
planning. Additional cash investment required in the event of these short to medium-term physical risks materialising has been
assessed as low with no material impact on the current operations and viability of the Group.
In terms of transitional risks, as users of grid-supplied and fossil fuel energy, the short-term focus is on improving energy
efficiencies in our operational processes and reducing 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. The Group has adopted a carbon-pricing model that will be used to
responsibly assess the potential financial impact of future projects. The Group has also adopted a decarbonisation strategy which
is aimed at reducing potential future carbon tax liabilities.
Presenting the Gem
Diamonds Annual Report
and Accounts 2022
Strategic
report
Performance
review Governance
Directors’
report
Financial
statements
Report on
payments to
governments
Additional
information
Gem Diamonds Limited Annual Report and Accounts 43
STRESS TESTS
The scenarios tested considered the Group’s revenue, EBITDA
1
, cash flows and other key financial ratios over the three-year
period. The scenarios included the compounding effect of the factors below and were applied independently of each other.
Effect Extent of sensitivity
analysis
Related principal risks Area of business model
affected
A decrease in forecast rough diamond
revenue from reduced market prices or
production volumes caused by
unforeseen production disruption due to
climate-related, electricity grid disruptions
or any other events.
26% • Rough diamond demand
and prices
• Production interruption
• Diamond damage
• Diamond resources and
reserves
• 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
An increase in mine operating costs
caused by volatility in diesel, explosives
and other consumable prices
30% • Variability in cash
generation
• Financial capital inputs and
outcomes
1
Refer Note 4, Operating profit on page 177 for the definition of non-GAAP measures.
CONCLUSION
The Group’s current net cash
1
position of US$3.3 million as at 31 December 2022 and undrawn facilities of US$82.6 million at 31
December 2022, subject to availability, would enable it to withstand the impact of these scenarios over the three-year period.
During the final year of the viability period, in 2025, there is no Satellite pipe ore available for processing. The timing of the
availability of this higher value ore is dependent on the Underground or Open pit Cut 6 decision, which will be made by the
Board during the viability period. The revolving credit facilities which expire on 22 December 2024 have 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 2025.
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).
STRATEGIC REPORT
44
CHIEF EXECUTIVE OFFICER’S
REVIEW
2022 was a year of solid operational performance and steady
execution of our strategy.
In 2022, the Letšeng mine emerged from the COVID-19 pandemic to resume normal operations, but new operational challenges
emerged following Russia’s invasion of Ukraine, which impacted global inflation and drove extraordinary increases in diesel
prices. In addition, Eskom’s significantly increased electricity outages posed challenges to the stability of Letšeng’s production
processes and negatively impacted costs due to the regular requirement for diesel power generation.
It is pleasing to report that the implementation of cost-saving and decarbonisation initiatives at Letšeng, aimed at energy
efficiency and carbon reduction, together with the additional reduction in waste tonnes from our revised mine plan for the year,
resulted in a 27% year on year reduction in the Group’s carbon footprint. We implemented the second year of our TCFD adoption
strategy, where we made good progress towards the Group’s long-term decarbonisation objectives.
We also advanced the updating of our Resource and Reserve Statement by completing a second core resource drilling
programme. We intend to publish the Resource and Reserve Statement in Q4 2023.
Letšeng also commissioned a comprehensive Underground Feasibility Study. We will have greater clarity on the way forward for
Letšeng as we finalise this important exercise and complete the trade-off studies between an underground operation to mine
the Satellite pipe versus another open pit cutback (Cut 6 West).
The October 2022 national elections in Lesotho saw a peaceful transition of power from the All Basotho Convention party to the
Revolution for Prosperity party in coalition with the Alliance of Democrats and the Movement for Economic Change. As
significant investors in the Kingdom of Lesotho, we have worked well with every government and will continue to do so. The
new government is business-orientated and investor-friendly and has announced several positive initiatives to improve service
delivery. One important example is the government’s commitment to issue work permits within a shorter defined time period.
This is an important step to enhancing economic growth and allowing for the speedy engagement of scarce technical skills.
Despite operating in challenging physical
conditions, we have a strong track record
of producing diamonds safely and
ethically. Our employees are fairly
remunerated, with their needs and
concerns carefully considered.
Clifford Elphick
EXTRACTING MAXIMUM VALUE FROM OUR OPERATIONS
We have achieved our objectives of extracting value for our stakeholders by operating safely, responsibly and efficiently. The
lifting of COVID-19 restrictions eased the supply constraints experienced in 2021 and allowed us to resume regular leadership
visits to Letšeng.
Tonnes treated decreased 11% year on year in line with the revised mine plan. This plan excluded the third party operated plant
from 1 July. Carats recovered decreased 7% to 106 704 (2021: 115 336).
Four diamonds greater than 100 carats were recovered during the year (2021: six). Exceptional sales during the year included the
three large high-quality Type IIa white diamonds of 245 carats, 128 carats and 125 carats, which sold for US$35 811 per carat,
US$28 618 per carat and US$12 123 per carat, respectively. The operational performance of the Letšeng mine is discussed in
more detail in the Operations review on page 56.
The diamond market improved in 2022 and demand for the high-quality white diamonds produced at Letšeng remained robust.
The average price achieved decreased slightly year on year by 4% to US$1 755 per carat (2021: US$1 835 per carat). The decrease
in the average price achieved compared to 2021 relates mainly to the quality of diamonds recovered and a slight softening of the
global diamond market in Q4 2022.
We have an effective, transparent and competitive tender sales process in Antwerp, with two additional viewings having taken
place in Dubai in 2022. The viewings in Dubai are convenient for clients from the United Arab Emirates, India and Israel. These
PERFORMANCE REVIEW
46
were well supported and contributed to the strong prices achieved. These viewings are now part of our annual tender calendar
and are scheduled to take place when appropriate. In 2022, Letšeng entered into an agreement with two important diamond
manufacturing clients who will supply polished diamonds to some of world’s most premium luxury brands. These diamonds are
polished to precise specifications and additional value is realised for the Group. This is a further step in the Group’s strategy to
move further down the value chain and to promote Letšeng as the exceptional diamond brand.
Group revenue decreased 6% to US$188.9 million (2021: US$201.9 million), which translates to underlying EBITDA of US$43.7
million and earnings per share of 7.3 US cents. Significant inflationary increases, specifically in diesel prices, resulted in profit
attributable to shareholders of US$10.2 million. The Group ended the year in a net cash position of US$3.3 million. More
information regarding the Group’s financial results is included in the CFO review on page 49.
The biggest challenge faced in 2022 was the unreliability of Eskom-generated power supply and the high cost of diesel. As the
incidence of load shedding increased and diesel costs rose, with the price of crude oil exceeding US$120 per barrel in June 2022,
the impact on profitability has been significant. Total operating costs rose 13% to LSL1 900.3 million (2021: LSL1 677.2 million),
and the costs related to diesel increased by 29% to LSL340.6 million (2021: LSL265.0 million).
The Government of Lesotho is showing a commendable determination to find solutions to reduce national dependency on
South Africa’s unreliable electricity grid. The Minister of Mines and his colleagues have been supportive of Letšeng’s intentions to
implement renewable energy solutions.
1
Refer Note 4, Operating profit on page 177 for the definition of non-GAAP (Generally Accepted Accounting Principles) measures.
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).
WORKING RESPONSIBLY AND MAINTAINING OUR SOCIAL LICENCE
Another highlight for 2022 is the Group’s improved safety performance. Once again, there were no fatalities (2021: none), three
LTIs (2021: six), and we achieved an overall AIFR of 0.70 (2021: 0.93), a 33% decrease year on year. We continue to implement
safety initiatives to reinforce our safety measures and responsible behaviour, and entrench a workplace safety culture founded
on mutual care and collaboration.
We adhere to the highest environmental management standards. We are proud to report that Gem Diamonds’ work in
sustainable water treatment and community water initiatives during 2022 was recognised by the award in the Water category
conferred by the Mining Indaba Sustainability Committee Junior ESG Awards Committee.
Our tailings storage facility management process aligns with the ICMM’s GISTM, which ensures the responsible management and
monitoring of the tailings storage facilities. In addition, our tailings storage and freshwater facilities are subject to regular
inspections by external experts. In 2022, we engaged an external consultant to evaluate our tailings storage facilities and to
review and update the dam breach analysis that was conducted in 2020, and no material issues or concerns were raised. In
addition, the engineer responsible for the Mothusi Dam, our freshwater dam, was consulted to provide an opinion on the safe
operating level of the dam. The engineer provided an opinion that the dam can be safely operated at 100% capacity. These
professional opinions together with the internal governance, management, monitoring and reporting processes ensure that our
tailings storage and freshwater dam management is both effective and closely monitored.
In 2022, our CSI activities resumed as normal and our focus areas, as aligned with our selected UN SDGs, are to support
infrastructure development, education and health while stimulating small businesses. In 2022, we supported small agricultural
operations including those in egg, vegetable and dairy production, provided scholarships for tertiary education, and delivered
water and sanitation projects in schools. From 2016 to 2022 the Group invested US$4.4 million in sustainable CSI initiatives.
In 2022, Gem Diamonds contributed a total of US$39.7 million (LSL649.3 million) to the Lesotho fiscus in the form of taxes,
royalties and dividends. We are proud of our contribution to this developing economy and our position as a significant taxpayer
and employer.
GEM DIAMONDS’ CONTRIBUTION TO LESOTHO
Jobs for 1 534 employees
and contractors of which 98% are
Basotho nationals
Local procurement
US$134.1 million
(LSL2 195.2 million)
Local procurement directly from PACs
US$2.4 million
(LSL39.3 million)
Local procurement from
regional communities
US$30.0 million
(LSL491.1 million)
Investment in training to
improve individual skills
51 bursaries and scholarships for
local students to date
10 schools and five villages
provided with potable water
and sanitation since 2010
PREPARING FOR THE FUTURE
Presenting the Gem
Diamonds Annual Report
and Accounts 2022
Strategic
report
Performance
review Governance
Directors’
report
Financial
statements
Report on
payments to
governments
Additional
information
Gem Diamonds Limited Annual Report and Accounts 47
In 2023, we aim to deliver the business plan approved by the Board. This includes achieving our financial and operational targets.
We will maintain a focus on further improving our safety performance by keeping up a steady drumbeat of safety interventions,
critical control management and communication.
Our capital plans include funding for projects that will sustain growth and value creation. The two major capital-intensive
projects in 2023 include the replacement of the primary crushing area (PCA), which commenced in 2022 and will be completed in
Q2 2023, and concluding the Underground Feasibility Study which was commissioned in July 2022. As soon as the latter is
concluded, we will evaluate the trade-off between the next cutback in the Satellite pipe versus an earlier and potentially more
cost-effective underground mining opportunity. The current open pit mine plan extends to 2040.
In 2023, we will prioritise consistent production levels while enhancing efficiencies. We will manage costs to protect cash flows
and strive to improve our capital return to shareholders. We are investigating new measures to maintain our status as a low-cost
operator in the face of significant inflationary pressures. This includes plans to right-size and further optimise operations at
Letšeng in line with its operational requirements. This right-sizing process has commenced in an appropriate and structured
manner to deliver these objectives.
Securing power independence
In 2022, Eskom shed over 1 900 hours of power, making it the most load shedding intensive year on record. The pain of severe
load shedding has been felt throughout all industries in southern Africa, from small businesses to large companies.
Lesotho is heavily dependent on Eskom, although there are plans at government levels to reduce this dependency. Over this
period, we had to significantly increase the utilisation of our two diesel generator farms to run for more frequent and extended
periods. This has required an investment in replacement generators and increased diesel storage as well as funding the
ongoing and increased related running and maintenance costs. While this allows us to be self-sufficient to continue operations,
the asset maintenance and fuel costs related to diesel generation are placing significant pressure on profitability.
We are therefore considering renewable energy sources. We have a team of experts examining all potential solutions, including
wind, hydro and solar. We have completed the foundation work in 2022 to outline all the practical solutions. In 2023, we will
advance this programme and plot the way forward for Letšeng. This also speaks to our long-term decarbonisation strategy,
while addressing the immediate need to provide energy at a price that is sustainable for the business.
OUTLOOK
The Russian invasion of Ukraine might continue to hamper global growth, increase energy costs and exacerbate geopolitical
tensions. While there are mixed signs of inflation starting to ease, interest rates across the globe remain high and could pose a
constraint to growth. However, the major developing nations are already reporting a positive growth outlook for 2023/2024, and
China’s reopening paves the way for a rapid rebound in economic activity in that country. Many analysts expect high levels of
savings among Chinese consumers during the pandemic to translate to greater spending in 2023. This bodes well for the global
diamond market as Chinese consumers represent the world’s second-largest market for diamonds. In China, women increasingly
buy diamonds for themselves to celebrate their achievements and financial independence.
Despite the highly uncertain economic market conditions, the global luxury market continued to grow in 2022 and remains
poised to expand further in 2023. The luxury market appears well positioned to cope with economic turbulence, with a larger
and more resilient consumer base. According to a report by Bain & Company, the luxury market consumer base broadened to
400 million consumers in 2022 and is expected to expand to 500 million consumers by 2030.
In the medium to long term, rough diamond prices should be supported by favourable demand and supply fundamentals, which
are underpinned by continued growth in demand from markets such as the US, China and India, contrasted with a projected fall
in rough diamond supply. This dynamic of rising demand and constrained supply is expected to benefit high-quality rough
diamonds in particular. The fundamentals that underpin our business are sound and strongly position Gem Diamonds for
success.
APPRECIATION
I would like to thank the Board for their strong leadership and commitment in 2022. I appreciate our hard-working employees for
their efforts to deliver our strategic goals and for living our values. I would also like thank our customers for their continued trust
and for purchasing Letšeng’s diamonds, and our shareholders for their faith in our business. Finally, I thank the Government of
the Kingdom of Lesotho for their support and our productive engagements. We look forward to another mutually beneficial year.
Clifford Elphick
Chief Executive Officer
15 March 2023
PERFORMANCE REVIEW
48
CHIEF FINANCIAL OFFICER’S
REVIEW
The Group delivered a solid financial performance in 2022 despite
the volatile global economic environment, significant inflation,
extraordinary fuel costs and increased grid electricity interruption.
Underlying EBITDA decreased 24% to
US$43.7 million
from US$57.4 million in 2021
Profit attributable to shareholders:
US$10.2 million
(2021: US$14.8 million)
Earnings per share:
7.3 US cents
(2021: 10.5 US cents)
The Group ended the year in a net cash position of
US$3.3 million
(2021: US$20.9 million)
Share buyback programme: 1 520 170 shares purchased for
US$1.2 million
(2021: nil)
Unutilised available facilities of
US$82.6 million
(2021: US$74.3 million)
We implemented several initiatives to
reduce the impact of significant cost
increases, drive efficiencies and effectively
manage operating costs in a highly volatile
and uncertain economic environment.
Michael Michael
We delivered a credible financial performance for 2022 despite several operational challenges and turbulent global economic
conditions. Most major economies experienced unprecedented levels of inflation in 2022, which showed some signs of easing
late in the year. Russia’s invasion of Ukraine significantly impacted the global economy and resulted in significantly higher fuel
prices, and several suppliers also passed on higher than inflation increases to the operations. In response, we looked at
opportunities to decrease our consumption of diesel by reducing waste tonnes mined and introducing shorter haulage
distances. In the medium to long term, we are looking to reduce our reliance on diesel generators by pursuing renewable energy
solutions.
Our Letšeng operation performed in line with expectations, despite several challenges presented by an exceptionally high
rainfall season and snow, increased electricity supply disruptions and higher than anticipated operating costs. We benefited from
a strong diamond market, and achieved an average price of US$1 755 per carat for the year. The overall dollar per carat achieved
was negatively influenced by a decrease in large, high-value diamond recoveries compared to 2021.
In 2022, we supported shareholder value creation by paying a dividend of 2.7 US cents per share and we initiated a share
buyback programme in April 2022.
Underlying EBITDA
2
decreased to US$43.7 million from US$57.4 million in 2021. Profit attributable to shareholders for the year
was US$10.2 million, equating to basic earnings per share of 7.3 US cents on a weighted average number of shares in issue of
139.8 million.
The Group ended the year with a cash balance of US$8.7 million and drawn down facilities of US$5.4 million, resulting in a net
cash position of US$3.3 million (2021: net cash of US$20.9 million) and unutilised facilities of US$82.6 million.
Presenting the Gem
Diamonds Annual Report
and Accounts 2022
Strategic
report
Performance
review Governance
Directors’
report
Financial
statements
Report on
payments to
governments
Additional
information
Gem Diamonds Limited Annual Report and Accounts 49
Summary of financial performance
Refer to the full annual financial statements from page 146.
US$ million
2022 2021*
Revenue from contracts with customers
188.9 201.9
Royalties and selling costs
(20.3) (21.9)
Cost of sales
1
(116.2) (113.5)
COVID-19 related costs
(0.1) (0.7)
Corporate expenses
(8.6) (8.4)
Underlying EBITDA
2
43.7 57.4
Depreciation and mining asset amortisation
(8.4) (8.6)
Share-based payments
(0.3) (0.4)
Other operating expenses
(2.4) (3.3)
Foreign exchange gain
1.9 1.9
Net finance costs
(4.1) (4.0)
Profit before tax for the year
30.4 43.0
Income tax expense
(10.2) (15.6)
Profit after tax for the year
20.2 27.4
Non-controlling interests
(10.0) (12.6)
Attributable profit
10.2 14.8
Earnings per share (US cents)
7.3 10.5
Dividends per share (US cents)
– 2.7
*The prior year figures have been re-presented, as Gem Diamonds Botswana (Proprietary) Limited (Ghaghoo Diamond Mine) ceased to be classified as a discontinued operation during
the current financial reporting period. Refer Note 15, Assets held for sale of the notes to the consolidated financial statements.
1
Including waste stripping costs amortisation but excluding depreciation and mining asset amortisation.
2
Underlying EBITDA as defined in Note 4, Operating profit of the notes to the consolidated financial statements.
Revenue
The Group’s decrease in revenue was mainly driven by lower production volumes compared to 2021 (ore tonnes treated
decreased 11% to 5.5 million tonnes) and lower than average recoveries of large diamonds. Rough diamond revenue of US$188.6
million was generated at Letšeng, achieving an average price of US$1 755 per carat (2021: US$1 835 per carat). The Group sold 29
diamonds for more than US$1.0 million each, contributing US$56.3 million to revenue.
Letšeng has partnership agreements that allow the Group to share in the margin uplift on the sale of polished diamonds. In 2022,
additional revenue of US$0.3 million (2021: US$0.2 million) was generated from these partnership arrangements.
US$ million 2022 2021
Group revenue summary
Letšeng sales – rough 188.6 201.3
Sales – polished margin 0.3 0.3
Impact of movement in inventory – 0.3
Group revenue
188.9 201.9
PERFORMANCE REVIEW
50
Letšeng Unit Cost Analysis
Unit cost
per tonne
treated
Direct
cash
costs
1
Third plant
operator costs
Total direct
cash
operating costs
Non-cash
accounting
charges
2
Total
operating
cost
Waste cash
costs per
waste tonne
mined
2022 (LSL)
252.50 10.57 263.07 82.02 345.09 66.74
2021 (LSL) 185.59 15.53 201.12 70.63 271.75 44.44
% change 36 (32) 31 16 27 50
2022 (US$)
15.42 0.65 16.07 5.01 21.08 4.08
2021 (US$) 12.55 1.05 13.60 4.78 18.38 3.00
% change 23 (38) 18 5 15 36
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, and finance lease costs, and exclude depreciation and mining asset
amortisation.
Expenditure
Operating expenditure
Group cost of sales increased slightly in 2022 to US$116.2 million from US$113.5 million in 2021. In 2022, the Group incurred
US$0.1 million in COVID-19-related costs (2021: US$0.7 million) to maintain COVID-19 protocols at its operations. Total waste-
stripping costs amortised decreased by 22% to US$36.3 million compared to US$46.8 million in 2021.
• Total operating costs in local currency increased by 13% to LSL1 900.27 million (2021: LSL1 677.21 million) which includes the
impact of non-cash accounting charges. The unit cost per tonne treated increased 27% to LSL345.09 (2021: LSL271.75 per
tonne treated) due to cost increases, especially the significantly increased cost of diesel and other consumables, and further
impacted by lower tonnes treated in the year. Ore tonnes treated decreased 11% to 5.5 million tonnes (2021: 6.2 million
tonnes).
• Direct cash costs (excluding waste) increased by 17% to LSL1 448.6 million. This was driven primarily by the cost of diesel. The
average price per litre of diesel increased by 68% from 2021 and, despite a 5.6 million litre decrease in consumption, resulted in
a 29% increase in diesel costs to LSL340.6 million from LSL265.0 million in 2021. Direct cash costs were also affected by price
increases from suppliers on explosives, equipment, spare parts and tyres. Significant effort was made to reduce costs and drive
efficiencies, such as steepening the slopes in the Main pit and decreasing waste hauling distances. Notwithstanding these
efforts and the impact of lower tonnes processed, direct cash costs per tonne treated increased by 36% to LSL252.50 from
LSL185.59 in 2021.
• Third plant operator costs reflect payments to Alluvial Ventures, the contractor, which are calculated from revenue
generated by the sales from diamonds recovered by the contractor plant. In 2022, the total cash costs in local currency
decreased by 39% to LSL58.2 million due to the expiry of the Alluvial Ventures contract on 30 June 2022.
• Waste cash costs decreased by 18% to LSL677.7 million from LSL829.4 million in 2021. Waste tonnes mined decreased by
(46)% (10.2 million tonnes compared to 18.7 million tonnes in 2021) but the decrease in volumes were offset by increased
costs, most notably diesel costs as disclosed above. Waste cash cost per waste tonne mined increased by 50% to LSL66.74
(2021: LSL44.44).
• Non-cash accounting charges refers to waste amortisation, stockpile and diamond inventory movements and finance lease
costs. Non-cash accounting charges increased 4% to LSL451.7 million (2021: LSL436.0 million). This is a combination of a
decrease in total waste amortisation charges of LSL594.0 million (2021: LSL692.3 million) due to lower tonnes mined during the
year, offset by a change in inventory in 2021 when there was a material increase at year end inventory values compared to
2020; the year end inventory values between 2021 and 2022 were similar. In addition, a write-down to net realisable value of
lower-grade stockpile material of US$1.6 million was recognised during the period.
Presenting the Gem
Diamonds Annual Report
and Accounts 2022
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report
Performance
review Governance
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report
Financial
statements
Report on
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Additional
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Gem Diamonds Limited Annual Report and Accounts 51
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 weaker against the US dollar (compared to 2021), which decreased the Group’s US dollar-reported
costs and increased local currency cash flow generation. The fluctuation of the exchange rates are set out in the table below:
Exchange rates 2022 2021 % change
LSL per US$1.00
Average exchange rate 16.37 14.79 11
Year end exchange rate 17.02 15.96 7
BWP per US$1.00
Average exchange rate 12.37 11.09 12
Year end exchange rate 12.75 11.76 8
GBP per US$1.00
Average exchange rate 0.81 0.73 12
Year end exchange rate 0.83 0.74 13
Royalties and marketing costs
In terms of Letšeng’s mining lease, it pays royalties to the Government of the Kingdom 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 decreased by 7% to US$20.3 million (2021: US$21.9 million) in line with the decrease in revenue.
Corporate costs
The technical and administrative office 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.
Corporate costs (excluding depreciation) were contained to US$8.6 million, representing a slight increase from 2021. In 2022,
US$0.1 million of project costs were incurred on the ongoing sales process of Ghaghoo and the implementation of certain TCFD
recommendations (2021: US$0.1 million).
Historical corporate costs (excl. depreciation) (US$ million)
9.3
8.3
7.4
8.3
8.5
0.7
0.8
0.1
0.1
0.1
Baseline costs Project costs
2018 2019 2020 2021 2022
Underlying EBITDA
1
and attributable profit
Group underlying EBITDA
1
decreased by 24% to US$43.7 million (2021: US$57.4 million) due to the decline in revenue and
increased operating expenditure. Profit attributable to shareholders was US$10.2 million, which translates to 7.3 US cents per
share based on a weighted average number of shares in issue of 139.8 million.
1
Underlying EBITDA as defined in Note 4., Operating profit of the notes to the consolidated financial statements.
PERFORMANCE REVIEW
52
Statement of financial position – selected indicators
US$ million 2022 2021
Property, plant and equipment 293 499 293 627
Non-current: receivables and other assets 2 916 1 278
Current: receivables and other assets 4 855 4 095
Inventory 30 370 31 158
Net income tax receivable 2 268 1 191
Cash and short-term deposits 8 721 30 913
Assets held for sale – 2 097
Non-current: interest-bearing loans and borrowings (4 370) (8 340)
Current: interest-bearing loans and borrowings (1 575) (2 704)
Liabilities associated with assets held for sale – (4 100)
Net deferred tax liabilities (76 036) (77 355)
Non-current: rehabilitation provisions (15 387) (11 202)
Capital expenditure
The Group’s capital expenditure increased for 2022 as capital spend was incurred on the replacement of the PCA, with
completion expected in Q2 2023, the commencement of the Underground Feasibility Study for the Satellite pipe, and the core
drilling programme to inform the Resource and Reserve Statement. The designs for the Patiseng Coarse Tailings Facility
expansion project and the bioremediation plant were also completed during the year. Total capital expenditure (excluding waste
stripping) was US$11.9 million during the year (2021: US$4.0 million).
Cash at hand
At year end, cash on hand totalled US$8.7 million (2021: US$31.1 million) and net cash of US$3.3 million which was a decrease in
net cash of US$17.6 million year on year. Group cash generated by operations was US$82.8 million before capital and waste
investment of US$59.7 million. Gem Diamonds’ share buyback programme and the dividend paid to its shareholders totalled
US$4.8 million. In addition, the Lesotho Government’s portion of dividends and withholding taxes extracted from Letšeng was
US$10.5 million.
Loans and borrowings
The Group-wide debt refinancing for Letšeng and Gem Diamonds was successfully concluded in December 2021 for
LSL750.0 million and US$30.0 million respectively, for an initial three-year period. Security for the facilities was implemented over
Gem Diamonds’ bank accounts and its shareholding in Letšeng, reducing the margin on the interest rates applicable to these
facilities by 1.5%.
Letšeng has a ZAR100.0 million (US$5.9 million) general banking facility with Nedbank Limited (acting through its Nedbank
Corporate and Investment Banking division) renewable annually. There was no drawdown on this facility at year end.
Presenting the Gem
Diamonds Annual Report
and Accounts 2022
Strategic
report
Performance
review Governance
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Gem Diamonds Limited Annual Report and Accounts 53
The funding partners to the facility agreement are Nedbank, Standard Bank and Firstrand Bank (through their respective
operations). Nedbank’s portion of the funding, totalling US$31.1 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. These KPIs were assessed for 31 December 2022 and will be assessed again on 31 December
2023.
The two KPIs included for the SLLs both need to be met at each measurement date before the margin reduction on these loans
becomes effective. The carbon emissions reduction KPI was achieved at 31 December 2022, but due to delays in the construction
of the bioremediation plant, the water conservation KPI could not be measured. No margin reduction will therefore be
implemented on any utilisation of the facility in 2023.
In 2022, Letšeng implemented a four-and-a-half-year facility agreement for the replacement of the PCA to an amount of
R136.4 million (US$8.0 million) with Nedbank. The facility is underwritten by the Export Credit Insurance Corporation of South
Africa (ECIC). At year end, an amount of LSL92.8 million was utilised (US$5.4 million). Repayment of this facility is scheduled to
commence in Q4 2023 once the balance of the facility is drawn down, which is expected by May 2023.
At year end, the Group had utilised facilities of US$5.4 million (as mentioned above), resulting in a net cash position of
US$3.3 million and available facilities of US$82.6 million. Gem Diamonds, the Company, ended the year with no outstanding
facilities (2021: US$9.0 million).
Letšeng made final repayments of LSL19.0 million (US$1.2 million) on its project debt facility for the construction of the mining
workshop complex which expired on 30 September 2022.
The Group regularly engages with funders and credit providers to ensure continued access to funding and to manage cash flow
requirements.
Summary of loan facilities as at 31 December 2022
Company
Term/description/
expiry Lender Interest rate
1
Amount
US$ million
Drawn down/
Balance due
US$ million
Available
US$ million
Gem Diamonds
Limited
Three-year
revolving credit
facility
Expires
22 December 2024
Nedbank
Standard Bank
Firstrand Bank
Facility A
(US$30 million):
US$ 3-month
LIBOR + 5.00%
Term SOFR +
0.26% + 5.00%
2
30.0 – 30.0
Letšeng Diamonds Three-year
revolving credit
facility
Expires
22 December 2024
Standard Lesotho
Bank
Nedbank Lesotho
First National
Bank of Lesotho
Firstrand Bank
Facility B
(LSL450 million):
Central Bank of
Lesotho rate +
3.25%
2
26.4 – 26.4
Nedbank Facility C
(ZAR300 million):
South African
JIBAR + 3.05%
1
17.6 – 17.6
Letšeng Diamonds Four-and-a-half-
year project facility
Expires
31 May 2027
Nedbank
Export Credit
Insurance
Corporation
ZAR136 million
South African
JIBAR + 2.50%
8.0 5.4 2.6
Letšeng Diamonds General banking
facility
Annual review in
March
Nedbank ZAR100 million
South African
Prime Lending
Rate minus
0.70%
5.9 – 5.9
Total 88.0 5.4 82.6
1
At 31 December 2022 LIBOR was 4.47% and JIBAR was 7.26%.
2
The transition from LIBOR to term SOFR on the GDL RCF was concluded on 30 November 2022 and is effective from all interest periods starting on or after 1 January 2023.
Ghaghoo
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 and continues to engage a number of interested parties. In parallel, Gem Diamonds is
discussing various alternatives with affected stakeholders, including the potential closure of the mine.
PERFORMANCE REVIEW
54
The operation remains on care and maintenance but due to the failure to close a sales transaction, including considerations of
potential closure of the mine, Ghaghoo no longer met the highly probable requirements as set out in IFRS 5 and therefore
Ghaghoo ceased to be classified as a discontinued operation held for sale as at 31 December 2022. As a result, a reassessment of
the carrying value of the remaining assets resulted in an impairment of US$0.7 million (2021: nil). This, together with the care and
maintenance cash costs of US$1.9 million (2021: US$2.1 million), is included in other operating expenses. An additional US$0.2
million (2021: US$0.2 million) on the unwinding of the environmental rehabilitation provision resulted in a non-cash interest
charge which is included in finance costs. The decrease in cash costs was mainly due to the favourable exchange rate and further
reduction of care and maintenance activities.
Insurance
The perception of risk in the mining industry has improved, with insurers offering more competitive rates for mining companies.
In 2022, insurance premiums for the Group were 13% lower compared to 2021. The Group is in the second year of a five-year
multi-aggregate insurance policy to mitigate the increased risk of higher deductibles in the unlikely event of an unexpected loss.
Letšeng pursued two insurance claims in 2022. One relates to the business interruption claim for insured losses arising out of the
COVID-19-related shutdown in 2020, where the mine was required to be placed on care and maintenance. We hope to receive an
appropriate settlement in 2023. The second claim relates to diesel theft identified in 2021.
Share-based payments
The share-based payment charge for the year was US$0.3 million (2021: US$0.4 million). At the AGM on 2 June 2021, shareholders
approved the 2021 Remuneration Policy, which included the introduction of a post-termination shareholding, an employee
pension alignment plan, as well as the new Gem Diamonds Incentive Plan (GDIP) for Executive Directors. On 4 April 2022,
1 007 098 nil-cost options were granted to certain key employees and Executive Directors under the new GDIP. Refer to the
Remuneration Committee report on page 119 for more detail.
Dividends and share buyback programme
In line with the Group’s commitment to deliver sustainable shareholder returns, the Board proposed a dividend of 2.7 US cents
per share (US$3.8 million) which was approved at the 2022 Annual General Meeting and paid in June 2022.
In addition, the Board launched a share buyback programme on 12 April 2022 and purchased 1 520 170 shares that are held as
treasury shares. The weighted average purchase price was 60.05 GB pence (78.07 US cents) per share. An amount of US$1.2
million was spent up to 7 June 2022, which is the date that the Board authority lapsed. We believe that this buyback represents
another important mechanism by which to return further capital to shareholders. The share price strengthened immediately
following the announcement of the share buyback programme. At the AGM on 8 June 2022 shareholders again authorised
Gem Diamonds to purchase its own shares within the permitted parameters. The programme, however, was not reinstated to
preserve cash in light of increasing operating costs.
The Board is not proposing a dividend based on the 2022 financial results due to the volatility in the current economic outlook
and the need to preserve the Group’s available cash resources.
TAXATION
The Group applies all relevant principles in accordance with prevailing legislation in assessing its tax obligations. The Group’s
effective tax rate was 33.8%. Most of the Group’s taxes are incurred in Lesotho, which has a corporate tax rate of 25%. The
effective tax rate is above the Lesotho corporate tax rate mainly due to deferred tax assets not recognised on losses incurred in
other operations.
The Group continues to pursue a long-standing legal matter relating to an amended tax assessment that was issued to Letšeng
by the Revenue Services Lesotho (RSL) (previously known as the Lesotho Revenue Authority (LRA)) in December 2019,
contradicting the application of certain tax treatments in the current Lesotho Income Tax Act 1993. We expect to pursue this
matter in the courts in 2023. We have sought senior legal counsel and their advice indicates good prospects for success. Refer to
the accounting treatment for this matter, Note 1.2.28, Critical accounting estimates and judgements for further detail.
OUTLOOK
We are driving several initiatives to contain our operating costs in a volatile environment. These include a focus on reducing the
impact of significant cost increases and investing in renewable energy to support our decarbonisation strategy. We have
commenced the optimisation and right-sizing of Letšeng. This project will include a coaching and mentoring component to
address skills and experience challenges at supervisory and management levels together with certain targeted operational
performance issues. This project will consider resizing the business to ensure a more appropriate skills match with the current
profile of our operations. This is a difficult but necessary step to ensure that our continued status as a low-cost operator is
maintained.
Michael Michael
Chief Financial Officer
15 March 2023
Presenting the Gem
Diamonds Annual Report
and Accounts 2022
Strategic
report
Performance
review Governance
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statements
Report on
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Additional
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Gem Diamonds Limited Annual Report and Accounts 55
OPERATIONS REVIEW
2022 saw robust operational performance and improving
operational efficiencies in challenging physical and economic
conditions.
2022 OVERVIEW
• Zero fatalities, three LTIs (2021: six), an LTIFR of 0.13 (2021: 0.24) and an AIFR of 0.70 (2021: 0.93).
• Zero major or significant environmental or stakeholder incidents.
• Focused dam and tailings facilities management.
• Energy efficiency and carbon reduction initiatives resulted in a 27% year on year reduction of the Group’s carbon footprint.
• Objectives of the second year of our three-year TCFD adoption strategy completed.
• Recovered four diamonds greater than 100 carats, including two high-quality Type IIa white diamonds of 244.34 carats and
127.58 carats.
• Sold 29 diamonds for over US$1.0 million each, generating revenue of US$56.3 million.
• Average price of US$1 755 per carat achieved, with highest prices achieved being:
• US$79 543 per carat for a 10.07 carat pink diamond.
• US$66 059 per carat for an 8.41 carat pink diamond.
• US$53 834 per carat for a 30.01 carat white diamond.
• Supported our PACs through investment in education, school infrastructure, small business development and clean water
projects.
• Received our sixth consecutive annual ISO 14001(Environmental Management) and 45001 (Occupational Health and Safety
Management) certifications.
• Completed the 2021-2022 core resource drilling programme and commenced an Underground Feasibility Study for the
Satellite pipe.
• Commenced the PCA replacement project, to be completed in Q2 2023, with commissioning early in Q3 2023.
• Completed the designs for a modular bioremediation plant to be constructed in 2023.
PERFORMANCE
Safety
The Group's safety culture is founded on our commitment to zero harm and the belief that all injuries are preventable. Letšeng
recorded zero fatalities and three LTIs during 2022 (2021: six), resulting in an improved LTIFR and AIFR of 0.13 (2021: 0.24) and
0.70 (2021: 0.93), respectively. Letšeng’s safety performance improved in 2022, with the implementation of an organisational
safety culture maturity programme yielding positive results. In 2022, Letšeng commenced a two-year safety maturity strategy
aimed at addressing critical safety risks, enhancing safety-specific leadership visibility, and engagement and implementing
engineering and behaviour-focused controls to more specifically prevent safety incident reoccurrences. The programme is
guided by independent subject matter experts and includes mentoring senior management on best practice safety leadership
and successfully implementing our critical control management strategy.
Safety performance Unit 2022 2021
Fatalities Number 0 0
LTIs Number 3 6
LTIFR 200 000 man hours 0.13 0.24
AIFR 200 000 man hours 0.70 0.93
PERFORMANCE REVIEW
56
Operations
KPI Unit 2022 2021 % change
Ore mined tonnes 5 732 493 6 298 862 (10)
Waste tonnes mined tonnes 10 153 846 18 663 493 (45)
Ore treated tonnes 5 506 576 6 172 428 (11)
Carats recovered
1
carats 106 704 115 336 (7)
Carats sold carats 107 498 109 697 (2)
Average price per carat US$/carat 1 755 1 835 (4)
1
Includes carats produced from the Letšeng plants, the Alluvial Ventures plant and the coarse and fines tailings treatment plants.
Letšeng operated safely and responsibly throughout 2022 and we welcomed a resumption of more normal operating conditions
post COVID-19, particularly a more reliable supply chain. This however was short-lived as the Russian invasion of Ukraine and the
ensuing war brought about immediate inflationary, cost and supply chain challenges globally, directly impacting our operations.
Extreme weather conditions at Letšeng, including exceptionally high rainfall and snow, although well managed, resulted in
intermittent disruptions to our mining operations. The positive impact of the high rainfall throughout the wet season was that
the freshwater dam reached 92% of its capacity and, based on current usage rates for operational requirements, has sufficient
freshwater capacity for up to nine years.
The 2022 Lesotho general election held in October required a compulsory two-day site-wide shutdown at Letšeng to allow the
workforce to vote in their respective constituencies. Although operations were halted for two days, the time was used to perform
scheduled maintenance to mitigate the impact of lost operating time.
Waste tonnes mined
Total waste tonnes mined in 2022 decreased (46)% to 10.2 million tonnes from 18.7 million tonnes in 2021. This was in line with
the planned 2022 waste mining profile, further optimised with the successful implementation of slope steepening of the active
cutbacks in the Main pit. This followed the successful steeper slope and berm retention programme implemented in Cut 5 West
of the Satellite pit during 2021. To further optimise waste mining and the cost thereof, we enhanced our initiative to further
reduce the haulage distances travelled from the Main pit, in particular the new Cut 4 West cutback, to the waste dump.
Ore mined
Total ore tonnes mined in 2022 decreased 9% to 5.7 million tonnes from 6.3 million tonnes in 2021. This was in line with the 2022
mine plan, taking into account the treatment capacity of the plants, including the reduced requirement of ore mining following
the expiry of the Alluvial Ventures processing contract on 30 June 2022, and required stockpile management.
Ore treated
Ore treated during 2022 of 5.5 million tonnes (2021: 6.2 million tonnes) comprised 5.1 million tonnes treated by Letšeng’s two
plants (2021: 5.2 million) and 0.4 million tonnes treated by Alluvial Ventures, the third party processing contractor (2021: 1.0
million). The reduction in total ore tonnes treated in 2022 compared to 2021 was mainly driven by the expiry of Alluvial Ventures’
processing contract on 30 June 2022. Of the total ore treated, 2.5 million tonnes were sourced from the Main pipe and 3.0 million
from the Satellite pipe, the latter being in line with the planned annual Satellite ore contribution.
The biggest challenge to the performance and stability of the plants in 2022 was the negative impact of more frequent and
longer periods of grid power outages resulting from increased load shedding by Eskom. Although the work completed on
increasing Letšeng’s back-up generator capacity and improving the synchronised switch-over to generator power yielded
benefits, the additional strain on and instability caused by more frequent and longer load shedding increased the risk of plant
and equipment breakdowns and chokes. An example of this was a sudden secondary crusher breakdown in Plant 2 in October
2022, which caused 3.5 days of downtime to repair. The significantly increased utilisation of diesel generators, together with the
increased cost of diesel in the year, had a significant negative impact on operating costs.
Other challenges to plant performance included the maintained lower feed rate of the current ageing primary crusher asset in
2021, to protect its longevity, while the replacement PCA is being constructed. This impacted the ability of the current primary
crusher to keep up with plant demand, creating plant feed challenges at times. The new PCA will be commissioned in Q3 2023
and comprises a twin module design with a combined throughput of c.1 000 tonnes/hour.
Extensive work to resolve identified issues of plant stability, appropriate maintenance strategy implementation, and certain other
issues causing inconsistent performance, yielded positive results in Q4 2022 as plant stability and performance improved. Further
improvement and optimisation of the organisational structure is being implemented to ensure that the operation and
maintenance of the plants are more effectively and efficiently managed.
Total carats recovered
Total carats recovered in 2022 decreased 7% to 106 704 carats (2021: 115 336 carats) due primarily to comparatively lower
production volumes treated.
The coarse tailings mobile XRT sorting machine recovered 774 carats in 2022 (2021:1 098 carats) from re-treating coarse recovery
tailings, and an additional 2 657 carats (2021: 213 carats) were recovered by the fines tailings mobile XRT sorting machine, which
treated both historic and current fines recovery tailings.
The overall grade for 2022 was 1.94cpht which is higher than 2021 and in line with the expected reserve grade. The contribution
from Satellite pipe material accounted for 55% of all material treated during the year (2021: 54%).
Presenting the Gem
Diamonds Annual Report
and Accounts 2022
Strategic
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Performance
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Gem Diamonds Limited Annual Report and Accounts 57
Large diamond recoveries
In 2022, Letšeng recovered four diamonds greater than 100 carats, and total diamonds recovered greater than 10 carats
decreased by 11% year on year, mostly in the 10 to 20 carat size category. The lower number of diamonds in the larger categories
can be primarily attributed to the domains of the resource that were mined in both the Satellite and Main pipes in 2022. A total of
126 greater than 100 carat diamonds have been recovered at Letšeng since 2006.
Number of large diamond recoveries 2022 2021
FY average
2008 – 2021
>100 carats 4 6 8
60 – 100 carats 18 16 19
30 – 60 carats 69 81 77
20 – 30 carats 108 122 114
10 – 20 carats 507 570 442
Total diamonds >10 carats
706 795 660
Diamond sales
Eight rough diamond tender viewings were held in Antwerp with two additional viewings held in Dubai in March and
September. All tenders were well attended and the competitive bidding evidenced that demand for Letšeng’s large, high-value
diamonds remained strong throughout the year.
A total of 107 498 carats were sold in 2022 (2021: 109 697) and Letšeng generated rough diamond revenue of US$188.6 million
(2021: US$201.30 million), at an average price of US$1 755 per carat (2021: US$1 835).
The Group supports the GIA’s blockchain technology to inform and assure consumers about the ethical and socially supportive
footprint of our diamonds. Blockchain technology can link the source of rough diamonds to the final polished diamonds, proving
their authenticity, provenance and traceability, and supporting ethical sourcing and processing in the diamond value chain.
Life of mine plan and Underground Feasibility Study
In Q2 2022 it was identified that the kimberlite contact on the west side of the Satellite pipe protruded further into the side wall
from where it had been previously mapped. This resulted in an inability to access the ore in the contact area safely and required
an amendment to the short-term Satellite pit design. Following a review of numerous solutions, the most appropriate plan was
to “step-in” on the pit design of Satellite Cut 5 West (C5W), which resulted in a deferment of ore originally planned for C5W into
either (i) the next cutback in the Satellite pipe (Cut 6 West (C6W)) or (ii) a potential underground operation. This has resulted in a
reduction in the volume of ore previously available in C5W, thereby reducing the life of this cutback from 2025 to 2024. We
continue to review and explore opportunities to extract additional ore from C5W – ie initiatives such as the use of a surface miner
to steepen remaining benches and other viable end-of-cutback opportunities (ie backloading of the ramp) that could bring
additional ore back into C5W.
In light of these changes, our long-term mine plan has been updated to take into account the reduced tonnes in Satellite C5W.
A conceptual desktop study for an underground mining operation in the Satellite pipe post the current C5W cutback was
completed in November 2021. The outcome indicated potential for underground mining and recommended that a
comprehensive Underground Feasibility Study be undertaken to confirm the feasibility thereof to most optimally and
economically extend the life of mine for the Satellite pipe. This study commenced in mid-2022 and is expected to be completed
in Q4 2023. The study will (i) assess the viability of an earlier shift to underground mining of the Satellite pipe, and (ii) inform the
trade-off between underground mining and proceeding with the next open pit cutback in the Satellite pipe (C6W) post the
completion of Satellite C5W in 2024. The study will encompass several underground feasibility studies, including geological and
hydrogeological drilling and modelling, geotechnical drilling, geo-metallurgy and social and environmental impact assessments.
Following the successful steepening of the pit slope angles in Satellite C5W, steeper slopes have now been implemented in the
Main pit Cut 4 East and Cut 4 West cutbacks. This has resulted in lower waste stripping requirements for the Main pit from c.12.0
million tonnes per annum to c.9.5 million tonnes per annum compared to the previous mine plan. This has also allowed access to
a further c.5.3 million tonnes of Main pipe ore. A third plant which was included in the previous mine plan has been deferred and
will be reassessed following the outcome of the trade-off between open pit and underground mining, resulting in reduced
annual treatment rates. These factors have had the impact of extending the mine plan to 2040 as set out in the graph below.
PERFORMANCE REVIEW
58
Resource development
Letšeng embarked on a Resource Development Project in 2016, the objectives of which initially were to improve the
understanding of grade and price variability within the five historical kimberlite domains (namely KMain, K6 and K4 in the Main
pipe and NVK and SVK in the Satellite pipe) which formed the basis of previous Resource and Reserve Statements. Letšeng’s last
independent Resource and Reserve Statement was published in 2015.
The first step in the process was to increase the drillhole coverage down to 300 metres below pit floor, including extensive core
drilling, petrography, mineral chemistry and micro-diamond studies. This core drilling programme was concluded in December
2018, with 12 drillholes (c.3 000 metres) in the Main pipe and 16 drillholes (c.4 000 metres) in the Satellite pipe. Sampling of the
core and related geological studies were carried out in 2019-2020. Preliminary geological models produced by SRK Consulting
suggested more complex internal geology in both pipes than was previously reflected in the 2015 Resource and Reserve
Statement. Additional drilling was therefore required to delineate the internal contacts between domains before the geological
models could be finalised and the Resource Statement updated. To achieve this, a further c.9 000 metre core drilling programme
was undertaken in late 2020, which was completed in June 2022 and comprised 13 core drillholes (c.3 500 metres) in the Satellite
pipe and 25 core drillholes (c.5 500 metres) in the Main pipe.
The draft geological models for the Satellite pipe indicated that yet more core drilling was required to adequately define contacts
in the central portion of the pipe. The drilling of four additional core drillholes (c.2 000 metres) in the Satellite pipe commenced
in December 2022 and will be completed by May 2023. The preliminary geological models for the Main pipe were completed by
SRK Consulting in November 2022. Work on the pit optimisation of both the Main and Satellite pits has commenced.
The focus in 2022 was completing the core drilling programme in the Main pipe and assembling the bulk sampling and pricing
data for the newly defined domains in both pipes. The primary challenge facing an in-pit core drilling programme of this nature
is competing with ongoing production activities for access to the drilling sites within the limited confines of each pit. Although
both the core drilling programme and continued production are vital to the sustainability of the operation, priority is given to the
latter.
The information from this latest drilling programme will inform both the updated Resource and Reserve Statement and the
Underground Feasibility Study currently being undertaken for the Satellite pipe. The updated Resource and Reserve Statement
and accompanying NI43-101 Technical Report are scheduled to be completed by the end of 2023.
Surface miner trial
In 2022, we further progressed a mining project to optimise ore fragmentation and plant throughput by trialling a surface miner
in Main pit Cut 4 East (MC4E). By year end, 0.2 million tonnes of ore were cut by the machine and treated as a sample through
both Letšeng’s plants. The surface miner technology presents a potentially diamond-friendly method of breaking the rock while
providing a consistently well-fragmented product to the plant, positively impacting throughput. In addition to achieving higher
truck payloads by replacing drilling and blasting in the kimberlite, the surface miner has the potential to allow for steeper pit
slopes in ore – thereby enabling access to more ore for the same waste stripped. Replacing the drilling and blasting process in
ore is also a cleaner mining method, as nitrates resulting from blasting are reduced. The incorporation of a surface miner into
Letšeng’s mining method for the Satellite pipe is being considered and discussions with various surface miner suppliers and
mining contractors have commenced.
Presenting the Gem
Diamonds Annual Report
and Accounts 2022
Strategic
report
Performance
review Governance
Directors’
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Financial
statements
Report on
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Additional
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Gem Diamonds Limited Annual Report and Accounts 59
Capital projects
Capital was appropriately allocated during 2022 and was in line with operational requirements. All project-related capital spend
is closely monitored by the Projects Steering Committee, attended by the COO (Chair), CFO and Senior Technical and Projects
Manager, together with senior management from Group and Letšeng. Letšeng’s key capital projects for 2022 included:
• the replacement of the PCA;
• commencement of the Underground Feasibility Study;
• the core drilling programme to inform the Resource and Reserve Statement; and
• the designs for the Patiseng Coarse Tailings Facility expansion project and the bioremediation project.
Details of overall costs and capital expenditure incurred at Letšeng are included in the CFO review on page 49.
The planned capital spend in 2023 relates mainly to 2022 carry-over capital, including the completion of the new PCA and
bioremediation project, and finalising the Underground Feasibility Study and Resource and Reserve Statement. No other major
new capital spend is anticipated in 2023.
Tailings storage facility and dam management
Operational status of our dams and tailings storage facilities
The recent global 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.
Letšeng has two tailings storage facilities (TSFs) and one freshwater dam on site:
1. the Patiseng TSF, which is currently in use for the deposition of coarse and fines tailings;
2. the Old TSF, which is sporadically used for fine tailings deposition; and
3. the Mothusi Dam, which is the mine’s freshwater supply source.
Letšeng’s TSFs and dam were constructed using the centre line and downstream tipping method, being a safer method of
construction than the “upstream” construction methods used in most recent dam failures reported in the mining industry.
The 2022 quarterly dam safety inspections for the Mothusi Dam were completed as scheduled. There were no adverse findings
regarding the safety of the dam or the possible failure modes relating to the embankment, the spillway structure or the seepage.
The exceptionally high rainfall experienced in 2021 and 2022 prompted us to request the Engineer of Record (EoR) responsible
for the Mothusi Dam to provide an opinion on the safe operating level of the dam. The EoR confirmed that the dam can be safely
operated at its 100% full supply capacity, subject to all operation and maintenance procedures being followed. The dam reached
100% full supply capacity in January 2023 and water started flowing down the spillway which had been extended to push the
flow away from the toe of the wall.
Our TSF management code of practice is aligned to that of the ICMM’s GISTM, and we have established appropriate governance
structures at both operational and Group levels to provide oversight and assurance of continued safe and responsible
management of our TSFs. The relevant details of Letšeng’s TSFs 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/.
An external consultant was appointed to conduct geotechnical investigations to provide the technical data and information to
understand the tailing storage facilities’ founding conditions and to review and update the dam breach analysis that was
conducted in 2020. The outcome of this work will inform the current consequence classification of our TSFs. This work has
commenced and is scheduled to be completed by Q3 2023.
There were no incidents of compromised dam or TSF integrity.
Governance framework
Our approach
It is our responsibility to guard our workforce, communities and the environment in which we operate against any potential risks
posed by our operations. TSFs, while an integral part of mining, present a significant potential hazard if not responsibly managed
and continuously monitored. Focused risk management is therefore crucial at every stage of the lifecycle of our TSFs.
In response to recent tragedies, the ICMM’s GISTM was established to achieve the ultimate goal of zero harm to people and the
environment. The GISTM requires operators to take responsibility and prioritise the safety of TSFs through all phases of their
lifecycles, including closure and post-closure. It also requires the disclosure of relevant information to support public
accountability. Gem Diamonds has committed to and adopted the GISTM standards.
PERFORMANCE REVIEW
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We recognise that ensuring the integrity of our TSFs and freshwater storage facilities is non-negotiable and integral in exercising
our responsibility to safeguard our workforce, communities and environment to ensure business continuity. We take a focused
and proactive approach to managing our TSFs according to appropriate international best practice. Retaining structures and
embankments undergo stringent safety monitoring in the form of inspections and audits, which are conducted both internally
and externally at regular intervals throughout the year. Stringent inspections and monitoring on a daily, weekly and monthly
basis include surveying various factors such as the densities of fines deposits, water levels, beach lengths and freeboard. Annual
structural stability analysis is also conducted at our TSFs and an early-warning system, together with community training and
awareness programmes, are used to ensure the emergency readiness of communities that could be affected in the unlikely event
of a failure. The nearest village is located 20km downstream from the mine.
The findings and recommendations stemming from these investigations and audits are reported quarterly to the Boards and
Sustainability subcommittees at both operational and Group level.
The Global Industry Standard on Tailings Management
The GISTM is directed at operators and applies to TSFs, both existing and to-be-built. It makes it clear that extreme consequences
to people and the environment from catastrophic TSF failures are unacceptable. To this end, operators must have zero tolerance
for human fatalities and strive for zero harm to people and the environment, which is directly aligned to our safety culture. The
GISTM provides the specified measures to prevent failure of TSFs and to implement best practices in planning, design,
construction, operation, maintenance, monitoring, closure and post-closure activities.
Our dam and TSF management, monitoring and assurance strategy
Patiseng TSF Daily inspections
and weekly surveys
of water level,
beach length and
freeboard as well
as overall TSF
condition
Quarterly structural
stability inspections by
the appointed EoR
Annual structural
stability assessment by
independent external
expert
• Facility risk
assessment
• Inundation studies
with flow modelling
• Geotechnical
characterisation
• Emergency assessments and planning
for wall failures
• Communication towers in downstream
villages
• Mobile phone contact with
communication custodians
• Alarm activation from within villages or
Letšeng emergency control centre
• Business continuity planning
Old TSF Daily inspections
and weekly surveys
of water level,
beach length and
freeboard as well
as overall TSF
condition
Quarterly structural
stability inspections by
EoR
Annual structural
stability assessment by
independent external
expert
• Facility risk
assessment
• Inundation studies
with flow modelling
• Geotechnical
characterisation
• Emergency assessments and planning
for wall failures
• Communication towers in downstream
villages
• Mobile phone contact with
communication custodians
• Alarm activation from within villages or
Letšeng emergency control centre
• Business continuity planning
Mothusi Dam Weekly inspections Annual dam safety
inspections by EoR
Quarterly dam safety
inspections by Letšeng,
reviewed by EoR
• Facility risk
assessment
• Flow modelling
study
• Resistivity surveys
• Emergency assessments and planning
for wall failures
• Communication towers in downstream
villages
• Mobile phone contact with
communication custodians
• Alarm activation from within villages or
Letšeng emergency control centre
• Business continuity planning
Storage
facility
Internal
inspections
External inspections Additional studies Measures in case of failure
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TSF Risk and Governance Management Framework
Board
The Board of Directors is informed of the status of the TSFs, providing confirmation
of the following:
• All TSFs have been designed with a full understanding of the consequence of
failure, site conditions and reasonably expected operating conditions.
• All TSFs are and will be constructed and operated in accordance with defined
thresholds and performance indicators, with particular reference to containment
integrity and overtopping risk management, and managed in accordance with
the Gem Diamonds TSF Management Standard.
• Construction, operation, maintenance and surveillance of each TSF is proceeding
in conformance to design intent.
• Compliance and performance are verified as part of the Gem Diamonds
assurance programme, both internally and externally. Non-conformances that
may increase risk to the point where the design intent may not be achieved are
identified, reported and addressed.
• An emergency response plan, based on a comprehensive understanding of the
consequences of failure, has been developed, implemented, maintained and
tested.
• In alignment with the requirements of the recently published GISTM, the above
items are independently verified by suitably qualified professionals (an external
reviewer/review board) at intervals dictated by the consequence classification of
each facility.
Risk and
Assurance
Risk management and assessment commensurate with the consequences of failure
of each facility is carried out routinely, the results of which are reviewed and
overseen by independent third-party experts.
Independent
Technical
Review
Board (ITRB)
• An appointed ITRB consisting of Senior Independent Technical Reviewers (SITRs)
is mandated for systematic and ongoing independent reviews.
• The ITRB provides independent technical review of the design, construction,
operation, closure and management of tailings facilities. The independent
reviewers are third parties who are not and have not been directly involved with
the design or operation of the particular tailings facility. The expertise of the ITRB
members reflects the range of issues relevant to the facility and its context and
the complexity of these issues. The ITRB reports directly to the COO.
Tailings
Governance
Committee
The Tailings Governance Committee is chaired by the COO, who reports directly to
the CEO on matters related to the GISTM, communicates with the Board of
Directors, and is accountable for the safety of tailings facilities and for minimising
the social and environmental consequences of a potential tailings facility failure.
Engineer of
Record (EoR)
The EoR is a qualified engineering firm or individual responsible for confirming that
the tailings facility is designed, constructed and decommissioned with appropriate
concern for integrity of the facility, and that it aligns with and meets applicable
regulations, statutes, guidelines, codes and standards. Every facility has an EoR
working continuously with the Responsible Tailings Facility Engineer (RTFE) and
operational management to ensure construction and operational adherence to
design, and that the structure is performing in line with the design intent.
Competent
person
(RTFE)
The RTFE is an engineer appointed by Letšeng who is responsible for the tailings
facilities. The RTFE must be available at all times during construction, operations
and closure. The RTFE has clearly defined, delegated responsibility.
PERFORMANCE REVIEW
62
Community engagement on TSF and dam safety
Letšeng provides the community and district-level stakeholders with balanced and objective information about the state and
safety of its TSFs and freshwater storage dam. This is done during quarterly public gatherings attended by community
representatives from nine neighbouring villages.
Consultations are held with these stakeholders on TSFs and dam-related safety activities and project decisions that directly or
indirectly affect them. Letšeng and six of the nine neighbouring villages jointly established the downstream emergency
preparedness programme. The aim of this programme is to alert the community in the event of a TSF or dam incident or any
other emergency that would require the communities to evacuate from the downstream villages.
We frequently conduct in-depth training of community members on how to respond during an emergency. Emergency
preparedness drills with community members are held every quarter. Assembly points have been identified and clearly marked
in the villages. A two-way radio system is also in place and is regularly tested. Sirens have been installed in the six villages which
are centrally controlled at the mine and manned 24 hours a day by the mine’s Emergency Team.
Stakeholder engagement platforms:
• Quarterly public gatherings with local communities.
• Daily, weekly and monthly engagement with community leaders.
• Biannual district-level stakeholder forums.
• Quarterly district leadership forums.
• Monthly district leadership meetings.
• Joint emergency preparedness drills.
OUR PLANS FOR 2023
We have several operational objectives for 2023. These include:
• Completion of the Underground Feasibility Study timeously and cost-effectively. Concluding this important study will allow us
to make strategic decisions on the way forward for Letšeng’s orebody (ie the trade-off between Satellite C6W and the early
access underground operation), and will also inform the updated Resource and Reserve Statement.
• Complete our updated Resource and Reserve Statement.
• Enhancing efficiencies and reducing costs. The optimisation and right-sizing of Letšeng’s operations to align with operational
requirements.
• Investment in renewable and/or alternative energy sources. Providing a consistent source of power for the mine operations
remains a challenge at Letšeng. A power usage study has been commissioned to inform the way forward on prioritised power
usage and assess the opportunities for lower-carbon and renewable energy sources.
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SUSTAINABILITY
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. As such, material matters include risks that must be
managed and opportunities that can be captured to enhance the sustainable viability of our 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 that considered internal and external
research. 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.
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
PERFORMANCE REVIEW
64
Our material matters
Environment Employees
A
Managing our environmental footprints
J
Providing a safe working environment
B
Managing and addressing climate change and
extreme natural events
K
Attracting and retaining qualified people
C
Ensuring consistent electricity supply and minimising
energy consumption
L
Providing learning and development opportunities
for employees
D
Planning for mine closure, protecting biodiversity
and enhancing conservation
M
Caring for our employees’ health and well-being
N
Engaging with employees and elected
representatives
Social Governance and ethics
E
Safeguarding our communities
O
Implementing effective Board-approved ESG
strategies
F
Ensuring positive engagement with our stakeholders
P
Prioritising business integrity
G
Working with communities to understand and meet
their needs
Q
Ensuring transparent governance and remuneration
practices
H
Creating shared value through localisation
R
Ensuring legal, regulatory and governance excellence
I
Honouring our social compact
S
Raising standards across the pipeline
T
Protecting the premium brand of diamonds
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WORKING TOWARDS
GLOBAL GOALS
We are embedding material UN SDGs in the Group’s strategy, 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 started in 2020 by adopting the following six UN SDGs, implemented over a
three-year rolling cycle, as this is a manageable and achievable target with widespread impact.
No poverty Good health and
well-being
Clean water and
sanitation
Decent work and
economic growth
Reduced
inequalities
Responsible
consumption and
production
Year one: 2020 Year two: 2021 Year three: 2022
Perform a gap analysis to evaluate
alignment with each UN SDG
Focus on addressing any shortfalls
identified in the first year and further
strengthening 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 this value:
Extracting Maximum Value from Our
Operations
Business integrity
Organisational health and safety
Advancing our people
Working Responsibly and Maintaining
Our Social Licence
Business integrity
Environmental stewardship
Organisational health and safety
Enhancing community benefits
Preparing for Our Future
Business integrity
Environmental stewardship
Organisational health and safety
Advancing our people
Resource efficiency
Enhancing community benefits
Sustainability
principles
underpin our
priorities
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
The UN SDGs
support,
contextualise
and inform the
principles
PERFORMANCE REVIEW
66
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 meaningful
legacy for future generations.
RELATED SUSTAINABILITY PRINCIPLES
Improving resource use efficiencies
Prioritising environmental protection
Optimising socio-economic benefit
RELATED UN SDGs
The following UN SDGs relate to our environmental pillar:
Refer to Our Approach to Climate Change Report 2022 for more information on our approach to integrating these UN SDGs into
our business operations.
SNAPSHOT OF OUR PERFORMANCE
Zero major or significant
environmental incidents
for the 14th and 9th consecutive year,
respectively
ICMM’s GISTM adopted
and dam safety management
framework implemented
US$0.8 million invested in
environmental protection during 2022
(2021: US$0.9 million)
US$15.4 million
environmental rehabilitation provision
(2021: US$14.9 million)
No fines for
environmental
transgressions or non-
compliance with host country
legislation for the 13th consecutive year
Decarbonisation and
carbon-pricing strategies and
targets adopted
Social and
environmental plan
(SEMP) updated and audited
ISO 14001
(Environmental
Management)
accreditation retained
Won Best Climate-Related
Reporting (Small Cap)
at the 2022 ESG Investing Awards
6.4 million m
3
of water recycled
(2021: 8.9 million m
3
, 2020: 8.8 million
m
3
)
Total carbon footprint
reduced from
153 863 tCO
2
e in 2021 to
112 827 tCO
2
e in 2022
Won the Responsible Water
Management and
Protection of Biodiversity
awards at the Investing in African Mining
Indaba 2022 (Junior ESG Awards)
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OUR GOALS
• Understanding and reducing our carbon footprint
• Improving our energy consumption efficiency
• Managing the effects of extreme weather events on our operations
• Reducing our reliance on fossil fuels.
• Advancing projects aimed at conserving water.
OUR OUTLOOK
We remain committed to environmental responsibility, including rigorous and ongoing monitoring and reduction of our
environmental footprint, reporting according to the recommendations of the TCFD and upholding our commitment to the UN
SDGs. In 2023, we will monitor and manage our climate-related exposure and measure our performance against our
decarbonisation targets in line with our TCFD roadmap. We will advance our bioremediation strategy, implement and track fuel
consumption, emission and cost-reduction initiatives, and maintain stringent management of our water and TSFs.
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 within our value chain to identify initiatives that reduce our
costs, resource consumption, and carbon, energy and water footprints.
Refer to Our Approach to Climate Change Report 2022 for details on our water, carbon and energy footprints.
Carbon
To ensure responsible stewardship of the environment around us, we measure, monitor and continually strive to minimise our
consumption. Our carbon footprint is an important aspect of our environmental stewardship.
Our Letšeng mine does not have wide-scale access to renewable energy sources such as hydro, wind or solar power in Lesotho.
We therefore require innovative and well thought-out energy and carbon initiatives to ensure a sustainable solution for the
Group (refer to page 74 for more information).
Water
Letšeng’s mine operations are 3 275 metres above sea level, on the watershed between the Khubelu and Matsoku drainages.
These drainages flow into the proposed Polihali Dam and the Katse Dam, respectively. To ensure clean water flows into these
dams and to our PACs, water management at Letšeng is prioritised throughout all aspects of our value chain. This water
management takes place in the context of increasingly dynamic weather systems which we expect to further intensify as a result
of climate change.
Letšeng experienced a severe four-year drought which ended in 2021. During this water-constricted period, a significant water
conservation strategy was developed and implemented throughout the operation. High levels of precipitation since the drought
resulted in the mine’s freshwater Mothusi dam returning to 88% capacity by the end of 2022. The Letšeng mine currently has
approximately nine years of available fresh water at current usage rates.
Patterns of extended droughts interrupted by short but extensive precipitation events align with the weather patterns predicted
by climate change models.
Waste
Responsible waste management plays a significant role in the sustainability of our business and the long-term protection of our
environment and surrounding PACs. We ensure the responsible management and disposal of mineral and non-mineral waste
generated by our operations.
Our approach
Carbon
Our goal is to improve our energy usage efficiencies, introduce renewable energy sources to our operations and reduce our
carbon emissions. We work with operations to identify and implement initiatives aimed at reducing costs, improving resource
consumption and carbon, energy and water footprints. Initiatives are primarily focused on reducing our Scope 1 and 2 carbon
emissions, including mobile and stationary fuel combustion and grid electricity, representing approximately 89% of the Group’s
total carbon footprint.
Our recently developed decarbonisation strategy considers all stakeholders and aligns with our goal of mining responsibly and
minimising our consumption and our impact on the environment. We ensure that our carbon footprint mitigation initiatives
remain relevant and progressive, and we measure and report on these biannually, most recently in Our Approach to Climate
Change Report 2022.
PERFORMANCE REVIEW
68
Hydrocarbon management
Letšeng operates on the principle of zero oil contamination to the environment and, accordingly, hydrocarbon management is a
high priority. Workshops and diesel depots are connected to oil separators to ensure minimal contamination of water and soil. If
an accidental oil spill occurs, the contaminated soil is collected and treated at an on-site soil treatment and remediation facility.
Water
Gem Diamonds has prioritised the stewardship of water through a comprehensive water management strategy at its operations.
Our responsible approach to water management has matured to align with appropriate best practice standards and operational
trends in water use and impact, and we prioritise the needs of our stakeholders.
Letšeng has a comprehensive water monitoring and stewardship plan, including a detailed water monitoring protocol for
analysing water quality on site and downstream, and monitoring consumption volumes through mining, treatment and other
site projects and activities.
We strive to minimise and manage the unavoidable impacts of mining activities on the natural environment by measuring
(through independent water quality assessments in and around the mine lease area), monitoring and minimising our
consumption, and considering our water footprint and waste within our value chain. Letšeng’s detailed water management
policy clearly sets out our adherence to best practice and operational trends in water use and impact (refer to
www.gemdiamonds.com).
We actively minimise fresh water use by recycling and reusing water on site, recovering run-off water, managing the impact and
flow of stormwater, and attempting at all times to lower our water consumption. Our recently improved stormwater
management system is designed to catch and redirect clean stormwater drainage into our freshwater dam. We continually
explore additional catchment and freshwater supply opportunities for our operation and PACs.
The implementation of our revised stormwater management plan significantly limited the operational reliance on natural water
catchments and safeguarded our water resources. As part of this plan, we implemented site-wide redirection measures and we
perform monthly stormwater infrastructure inspections.
The management of our TSFs and freshwater dams is aligned with the ICMM’s GISTM, as adopted in 2021 (refer to the case study
on page 60).
Waste
We continually seek ways to improve our waste reduction efforts to minimise our impact on the natural environment and PACs.
Our mining operations implemented waste management plans in line with the waste hierarchy: reduce, reuse, recycle and, as a
last option, dispose. Non-mineral waste generated at our operations is separated at source and managed in accordance with the
implemented waste management policies.
Our operations comply with the Basel Convention on the Control of Transboundary Movement of Hazardous Waste. We 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 responsibly disposed of in South Africa at certified sites which
issue certificates of safe disposal. Medical waste (from on-site clinics) is incinerated on site, which reduces the cost and emissions
associated with transportation of waste to the nearest alternative incineration site.
Mineral waste
Operationally, we continue to look at ways to minimise the mining and movement of mineral waste, including our steeper slope
project and shorter haulage distance initiatives, which have shown great success.
We retain our mineral waste on site at Letšeng in structures that comply with in-country requirements and international best
practice.
Refer to our tailings management case study on page 60 for more information.
Our performance
Carbon
In 2022, we recorded a 41 036tCO
2
e annual reduction in total Scope 1, 2 and 3 emissions. The reduction was mainly due to the
mining optimisation initiatives we implemented during Q4 2021, such as reduced waste tonnes mined, steeper slopes and the
30% reduction in mine waste hauling distances. These initiatives lower our carbon emissions through reduced fuel consumption.
To decrease costs, diesel consumption and carbon emissions, and increase mining efficiencies, we implemented new and
improved existing initiatives in 2022:
• Our focused waste rock dumping strategy reduced hauling distances and associated diesel consumption, lowering costs and
associated carbon emissions.
• We implemented the pit wall steepening in the Main pit, reducing the volumes of waste rock to be moved. This lowered costs
and reduced fossil fuel consumption and carbon emissions.
• Our reduction in explosives use lowered direct emissions and reduced the production of nitrates, supporting our
environmental and water management goals.
Refer to Our Approach to Climate Change Report 2022 for details on our carbon emission performance metrics and additional
information on our carbon initiatives and footprint.
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Water
Water usage reduction initiatives
This past year saw an increased focus on water usage efficiency within our business processes. We revised our water use
reduction strategy and implemented water-saving systems, including:
• improving stormwater management to minimise the potential flow of stormwater into mining and other operational areas;
• improving the pit dewatering system to reduce the water residency time in the pits;
• adopting a “closed-loop” return water system for makeup water required for processing activities; and
• implementing improved water treatment methodologies.
Refer to Our Approach to Climate Change Report 2022 for our water footprint and consumption performance metrics.
Waste
We continued our waste management and awareness campaigns, which have proven effective. We commenced a “no single-use
plastics” initiative on site in October 2022. As part of this initiative, we provided branded reusable carry bags for staff to replace
single-use plastic bags. The project showed immediate success, with single-use plastics usage dropping significantly across the
site.
We conducted an emissions survey to monitor our waste incinerator performance and introduced corrective measures to
improve monitoring and combustion efficiency.
PERFORMANCE REVIEW
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Water stewardship
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 our operation and PACs.
We ensure responsible consumption with respect for the natural resources we need. Our operations rely on a continuous
supply of water. We are mindful of our valuable relationship with our PACs, especially regarding access to sufficient potable
water. We know we cannot secure water resources for our mine without ensuring that the water requirements of our PACs are
met, and our Group water management policy considers the 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.
Our Letšeng operation is located in the Maluti Mountains of Lesotho and 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
sustainable solutions. One of the UN SDGs Gem Diamonds has adopted is SDG 6 – Clean Water and Sanitation. Access to safe
water and sanitation is a basic human right, and Letšeng has been working with stakeholders to improve access to water and
sanitation for our communities.
Since 2010, we have provided 10 schools and five villages with access to safe potable water and dignified sanitation facilities
through our corporate social investment (CSI) programme. These facilities have not only improved the health and hygiene of
students at the schools and for inhabitants of the villages, but also the health of the water-related ecosystems that previously
became polluted with E coli.
In addition to the water and sanitation provision projects in our PACs, Letšeng initiated a wetland rehabilitation and
establishment programme to restore these critical ecosystems to fully functioning status. Wetlands are lands saturated with
water, either permanently or seasonally, with distinct ecosystems that provide valuable services for humans and wildlife –
filtering pollutants, reducing flooding and providing habitats for fish, wildlife and indigenous plants.
Our wetland rehabilitation projects serve a three-fold purpose, to:
• rehabilitate natural wetlands;
• offset environmental impacts; and
• provide a natural source of water treatment.
The Qaqa engineered wetland was constructed downstream of the Qaqa waste rock dump. In addition to rehabilitating an area
previously mined for alluvial diamonds, it is anticipated that the wetland, perhaps the highest man-made wetland in southern
Africa, will improve water quality through natural biological and chemical filtering in the wetland biomass. Since 2013, the
wetland has continued to develop naturally, allowing indigenous vegetation to flourish. Through weekly water quality
monitoring, there has been steady progress regarding wetland establishment and water quality improvement. We anticipate
that results will improve as the wetland continues to establish itself over a longer period.
In 2015, Letšeng partnered with the Government of the Kingdom of Lesotho on the “sponge project” to protect and conserve
the “sponges” or wetlands in the Khubelu catchment through sustainable management. The wetlands are crucial to the
sustenance of the ecosystems and biodiversity in the catchment, providing livelihoods for humans, sustaining livestock and
regulating water storage, quality and flow. These benefits are important for the livelihoods of local communities and the
growth of the economy of Lesotho. Conservation of the wetlands is expected to reverse the losses already experienced due to
degradation and ensure a sustainable flow of services and benefits from the wetlands. We have published several case studies
demonstrating our investment in innovative technology to manage water stewardship and mature our processes and
technologies.
Monitoring and measuring
Letšeng Diamonds monitors the water quality in the Patiseng and Maloraneng streams and the Khubelu River monthly. We
collect water samples from several points in these watercourses and at varying distances downstream from the Letšeng mine.
The samples we collect are subject to independent laboratory testing.
We developed a comprehensive water monitoring protocol, collecting water samples monthly, quarterly and biannually from
selected sites throughout the mining lease area, and from control sites in rivers unaffected by mining activities. The water is
analysed for various chemicals, including nitrates, sulphates and metals. Additionally, river health is monitored by measuring
the biological status of diatoms and South African Scoring System Version 5 samples.
The mine’s performance on water quality is reported to stakeholders as mandated by the Record of Decisions issued by the
Lesotho Department of Environment.
Letšeng appointed GroundTruth, an independent water, wetlands and environmental engineering firm, to develop a Biannual
Water Quality Monitoring Report to support our SEMP commitments. GroundTruth collects water samples according to
scientific methodology and sends these to a South African National Accreditation System and ISO 17025-accredited water
laboratory in South Africa for chemical, microbiological and environmental analysis.
The Biannual Water Quality Monitoring Report informs our Annual Environmental Performance Report submitted to the
Department of Environment.
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Water quality
Elevated nitrate levels are often associated with mining activities, but can also be also attributed to the application of fertilisers,
human and animal waste, and other sources. As nitrates are produced by the decay of plants and animal and human waste,
nitrate pollution of water typically occurs wherever intensive land use activities take place. Nitrate-nitrogen concentrations
exceeding 20mg/ℓ are a common occurrence in groundwater. Nitrates may also be naturally present as a result of soil
nitrification processes from the mineralisation and mobilisation of nitrate from natural soil or host rock lithologies.
Water quality assessments at Letšeng confirmed that, before mining activities commenced, the natural levels of nitrate in the
surface water around the mine were approximately 15mg/ℓ. The World Health Organization published guidelines on the
concentration of nitrates that are considered detrimental to health, and found there are no adverse health effects where
drinking water consistently contains nitrates at concentrations below 50mg/ℓ. Ongoing water analysis over the years has
indicated an increase in nitrates in our water, mainly due to mining explosives residue. In 2014, in response to the increase in
nitrate levels, Letšeng commissioned an extensive nitrate management study to find and implement solutions to prevent
nitrate-infused water leaving the lease area. The established solutions have been far-reaching and effective. We also constituted
an official nitrate task team, working in collaboration with the relevant government departments in Lesotho. The operation has
implemented the following solutions to conserve water quality:
• Commissioned a wetland construction and rehabilitation programme.
• Refined and amended blasting practices and procedures to limit the volume of nitrates from explosives released into the
environment.
• Partnered with water conservation experts to trial the feasibility of fertigation and bioremediation as treatment methods, and
conducted leach testing to better understand the management options.
During 2021, we successfully completed the bioremediation pilot project at Letšeng to treat water with potentially higher
volumes of nitrates leaching from the waste rock dumps, and a modular bioremediation project is scheduled for
commissioning in Q3 2023. The bioremediation project will treat water seeping from the mine waste rock dumps, and the
treated water will be discharged from the plant into a newly constructed wetland before leaving the mine lease area.
We prioritise the needs of our stakeholders in our approach to water management, and our water strategy is based on
international best practice standards. Letšeng has a comprehensive water monitoring and stewardship plan, including external
and independent assessment of water quality inside and outside our mine lease area. We also consider the water quality results
of other stakeholders in the region – the Lesotho Highlands Development Authority being a key stakeholder as the custodian of
the Katse and Muela freshwater dams. Run-off from the mine found its way to two rivers near the mine, Matsuku and Khubelu.
These rivers are major waterways in Lesotho and form part of the Lesotho Highlands Water Provision Scheme. Historical testing
results indicate that mine activities have not impacted the water quality in either of the rivers. The most recent environmental
and water quality report from the Lesotho Highlands Development Authority indicates that nitrate levels in the dams are
consistently below 1mg/ℓ and they have confirmed that the water in the dams is of a good quality.
Our water quality testing protocol includes monitoring biological parameters, notably E coli and total coliforms. E coli bacteria
normally live in the intestines of healthy people and animals. When E coli is found in surface water, the water has been
contaminated with faeces from humans or animals. High levels of E coli and coliforms are especially common in rural
subsistence farming communities with livestock, such as our communities. It should be noted that elevated levels of nitrate do
not cause gastrointestinal issues.
Independent water quality assessments, conducted through an accredited laboratory, have consistently found elevated levels
of E coli and total coliforms in the Maloraneng Village (20km from the Letšeng mine), Patising village and Lithakong village
(23km from Letšeng) surface water sources. The E coli contamination is mainly due to livestock fouling the surface water
sources around the villages.
Most types of E coli are harmless or cause brief bouts of diarrhoea. However, a few strains can cause severe stomach cramps,
bloody diarrhoea, vomiting and bacterial dermatitis. Healthy adults usually recover from E coli infection within a week. Young
children and older adults have a greater risk of developing a life threatening form of kidney failure.
Letšeng is proud of our history of corporate social responsibility and partnerships with communities to ensure shared benefit.
Our on-site clinic provides emergency and primary healthcare for community members, and the considerable number of
bacterial gastroenteritis cases treated through our clinic resulted in a decision to assist communities with the provision of
potable drinking water, which we have done since 2014. The provision of safe drinking water resulted in a significant decrease
in gastroenteritis cases in the communities.
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Bioremediation
Bioremediation is a process that utilises naturally occurring micro-organisms in the soil to break down chemical compounds
found in water (for example, nitrates) and convert them to harmless gases found in the atmosphere (for example, nitrogen). It is
more cost-effective and less labour and energy-intensive than traditional technologies such as reverse osmosis.
Our pilot bioremediation plant has been operational at Letšeng since the beginning of 2017. Initial water quality samples
indicate that 95% to 99% of nitrates have been removed from the water treated during this process.
Based on this success, in 2021, Letšeng commissioned the design of a bioremediation project to treat water seeping from the
mine waste rock dumps into the RTZ catchment dam. The aim is to discharge treated water from the plant into a newly
constructed wetland, ensuring that natural sequestration takes place and any particulates settle out of the water. This passive
treatment process ensures that biodiversity and water quality are protected.
The location and construction of the bioremediation project have presented challenges relating mainly to access to power and
long lead times from global supply chains for necessary equipment. We have reviewed the implementation of this project and
prioritised the construction of a 300 000 litre per day plant, which we plan to commission in Q3 2023. In prioritising the
implementation of this project, we approved a modular design and workstreams and hold bi-weekly bioremediation cadence
meetings to ensure the project remains on track. In the meantime, we relocated our pilot bioremediation plant and a second
similar-sized bioremediation plant to the bottom of the waste dump area in the RTZ valley. We are currently treating
approximately 40 000 litres of water a day.
We are investigating the opportunity to use renewable energy for the bioremediation plants, and have identified a site for
sufficient renewable energy-powered capacity to power the baseload needed.
Managing and addressing climate change and extreme natural events
Our context
Due to remote locations, our operations are susceptible to frequent weather events such as snowstorms, extreme temperatures,
excessive rainfall and/or flash floods and drought. These events are exacerbated by climate change. Lesotho frequently
experiences localised floods that damage basic service infrastructure in often impoverished communities; 75% of the Lesotho
population resides in rural areas.
Human-induced climate change affects weather patterns across the globe. The International Panel on Climate Change Working
Group 1 predicts that global temperatures will exceed a 1.5˚C increase within the next two decades.
Understanding climate-related risks and potential impacts is key to assessing our organisational exposure and resilience to
climate change. Additionally, this knowledge guides us when updating business continuity plans and operational strategies to
mitigate the impact of climate change-related risks.
Our approach
We are cognisant of the risks presented by climate change and their potential impact on our operations and stakeholders. This
year, the Board adopted Gem Diamonds’ decarbonisation strategy, a commitment to a 30% reduction in Scope 1 and 2 emissions
by 2030, and a carbon-pricing model that will underpin the integration and assessment of decarbonisation into our operations
and all projects.
We continued the implementation of our three-year plan towards full TCFD compliance. The objectives set out in the first phase
of the roadmap were completed in 2021, and we delivered the phase 2 objectives in 2022. The final objectives in phase 3 will be
completed in 2023.
Phase 1 (2021)
Build the foundations to support meaningful science-based decision-making
Phase 2 (2022)
Understand the risks we face and reflect on our organisational resilience
Phase 3 (2023)
Establish clear metrics and targets for monitoring and managing our exposure
Refer to Our Approach to Climate Change Report 2022 for our detailed TCFD reporting.
In 2022, our work focused on mitigating the Group’s climate change impact by reducing Scope 1 carbon emissions, reducing our
grid electricity consumption, and assessing viable renewable energy options.
We improved business resilience through adequate assessment of climate change risks and opportunities, by understanding
adaptation measures available for the Group in response to climate risks, and by more effectively managing the physical risks
related to climate change and the location of our operations – including extreme weather events on site.
We view climate change through two lenses, in line with the TCFD framework’s recommendations. Firstly, we ensure operational
resilience and continuity regarding physical risks, including extreme weather events. Secondly, we are preparing for a just
transition to a low-carbon economy.
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The last three years were marked by an acceleration of climate change-related information and regulations. The Group embraced
this acceleration and is actively incorporating regulations and information into relevant climate change strategies and plans,
such as the Letšeng climate change adaptation and water management plans. These updates include specific physical climate
change-related risks identified through our climate change scenario analysis.
Our two mines are located in extreme environments, and we have been managing and responding to extreme natural events
since 2006. Our operational business continuity plans, disaster management plans, and all other operational procedures and
systems are informed by the weather experienced at these locations.
The Letšeng operation maintains a two-week supply of food and diesel in case extreme weather disrupts access and/or energy
supply. Additionally, our medical teams are equipped with extensive training in high-altitude rescues and emergency 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.
At the beginning of 2021, a four-year prolonged drought in Lesotho ended with localised flooding and persistent heavy
precipitation which continued in 2022. Our water management strategy prioritises water saving, recycling and catchment
efficiency initiatives to preserve water and ensure it is treated as a precious resource.
Concurrently, our teams respond swiftly to assist communities during periods of flood or drought. The increased frequency of
localised flooding and prolonged drought illustrates the potential impacts of climate change in the region around our Letšeng
operation.
Our performance
We implemented phase 2 of our three-phase TCFD roadmap with the following milestones:
• Our carbon-pricing model was finalised and adopted by the Board.
• Our decarbonisation strategy was finalised and adopted by the Board.
• We set a target of 30% Scope 1 and 2 emissions reduction by 2030.
• We implemented initiatives to improve efficiencies and reduce energy use.
• We augmented our climate-related Board and management structures.
• We further strengthened our enterprise risk management process, and expanded our assessment of physical and transition
risks.
• Certain executives and senior management participated in the UN Global Compact Climate Ambition Accelerator programme.
Ensuring consistent electricity supply and minimising energy consumption
Our context
A consistent and stable supply of power is critical for our mining operations. The Letšeng operation accounts for the vast
majority of the Group’s energy consumption in terms of fossil fuel-based energy and grid-based electricity. Scope 2 energy
consumption for the Group is primarily driven by grid electricity.
Letšeng receives its electricity supply from the South African grid, which has been experiencing load shedding – planned
interruptions to electricity supply – since 2007. Load shedding and grid instability affects the Letšeng operation, as the electricity
supply to Lesotho is cut periodically as part of the load shedding schedule in South Africa.
The amount and severity of load shedding is increasing steadily. South Africa experienced 207 days of load shedding in 2022,
compared to 75 days in 2021 and 54 in 2020. The availability of a sustainable and reliable power supply has therefore become
our principal risk.
Our energy use is directly related to our production of carbon emissions, not only to costs incurred. Our energy-saving initiatives
are increasingly synchronous with our emissions reduction initiatives, and our planning around energy and climate-related
concerns is increasingly integrated.
Our approach
A generator-based back-up power supply system is in place to ensure a consistent supply of energy to our mining operations
and associated infrastructure. The generators are operated when regional lightning strikes or Eskom-related electricity load
shedding impacts production.
Part of the work that the Group is doing to reduce its carbon emissions lies in identifying 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. We determined an internal carbon price to enable us to assess the impact of these, and other opportunities, on
our strategy, operations, projects, financial position and performance.
We recognise the need to appropriately transition to energy sources that are less carbon-intensive than the traditional fossil fuel-
based energy sources currently powering our operations.
Refer to Our Approach to Climate Change Report 2022 for information on our carbon-pricing model, decarbonisation strategy
and energy consumption performance.
As our operations move towards lower carbon emissions targets, we will continue evaluating power sources and technology to
reduce carbon emissions and secure stable and cost-effective energy supply.
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We are investigating renewable energy alternatives and have conducted several studies to determine their viability. While there
are significant challenges to full-scale adoption of renewables, including their potential impact on biodiversity, location-specific
irradiance and the extremely low temperatures on site, we are actively exploring all possibilities.
In line with our decarbonisation roadmap, our path towards targeted emissions reduction involves a phased approach,
beginning with identifying efficiencies in our processes and technology and reducing energy consumption.
Refer to Our Approach to Climate Change Report 2022 for information on our decarbonisation strategy.
Energy demand reduction and decarbonisation initiatives
We have adopted a bottom-up approach to embed energy-reduction and decarbonisation awareness across the Group, with a
series of workshops and presentations to explain to employees the concept of carbon footprint and the importance of carbon
reduction.
Education around climate change and decarbonisation continued throughout 2022, and the identification and planning of
emission-reduction initiatives took place at departmental level.
Our energy consumption prioritisation programme determines which operational elements can run on generator power when
grid energy is unavailable. Energy availability is prioritised for essential operational elements, resulting in less diesel usage and
lower costs and emissions.
Managing demand and consumption through behaviour-based initiatives stands to positively impact our costs and emissions,
and embed climate-related thinking among employees.
Our performance
• Ensured constant energy supply to Letšeng through a diesel generator power plant.
• Implemented an energy demand management programme.
• Established an Energy and Decarbonisation Committee.
• Reduced our year on year energy consumption by 27%.
To mitigate the risk of power interruptions, we ensure that load shedding schedules and regional weather prediction reports are
integrated into our production planning to facilitate effective change-overs to generator power.
Refer to Our Approach to Climate Change Report 2022 for our energy footprint performance metrics.
Planning for mine closure, protecting biodiversity and enhancing conservation
Our context
Gem Diamonds has developed and implemented an innovative strategy to sustain biodiversity within the mine lease area and
preserve the natural environment to promote the ecosystem services found in these unique bioregions.
The Letšeng mine is situated on the edge of the Maloti Drakensberg Transfrontier Project and the Ukhahlamba Drakensberg
World Heritage Site in the highlands of Lesotho. Mines have finite lifespans, and it is imperative that, as the mine owner, we take
responsibility for protecting the biodiversity of indigenous flora and fauna surrounding our mine post mine closure.
Through our closure planning, rehabilitation strategy and biodiversity management plans, we ensure that biodiversity is
included in our financial planning, mine closure and long-term strategic objectives, and that adequate financial provision is made
for rehabilitation. Our mine closure plans consider the socio-economic status and impacts of potential mine closure on our PACs
and our environmental effects.
Our approach
Letšeng is committed to mitigating environmental damage, protecting biodiversity and enhancing conservation efforts in the
areas in which we operate.
We collaborate extensively with our host countries, PACs, regulators, scientists and other industry stakeholders to implement
practical environmental protection strategies. Ultimately, we aim to contribute meaningfully to 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 consider all threatened, migratory and endemic species and regionally relevant ecosystem
services, such as rangeland, wetlands, grasslands and water. We implemented the biodiversity offset strategy at Letšeng to
mitigate mining-related impacts on biodiversity. The offset strategy includes:
• no-go areas protected from development;
• an indigenous plant garden;
• an artificial wetland construction programme;
• a native seed propagation and rehabilitation trial programme;
• a concurrent rehabilitation plan; and
• a grazing management plan in collaboration with subsistence farmers in the region.
Our offset strategy is supported by a comprehensive monitoring programme, enabling us to record and track species numbers
and diversity within the mine lease area and region.
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Our operations have mature and detailed SEMPs that underpin our biodiversity and conservation efforts. These plans consider all
threatened, migratory and endemic species within our mine lease areas and the regional ecosystems.
All potential biodiversity and environmental impacts of our mining activities are assessed as part of our SEIA process. Our SEMPs
consider the management and mitigation of direct, indirect and cumulative impacts. External biodiversity specialists developed
Operational Biodiversity Management Plans for Letšeng, which are reviewed annually.
We have designed and appraised post-mining closure and rehabilitation requirements and are undertaking concurrent
rehabilitation at our Letšeng operation. Our rehabilitation trials test various methods to find the optimal techniques for soil
stability and plant growth at Letšeng’s high altitude.
Our performance
Biodiversity and veld quality monitoring takes place every two years, with the last complete cycle occurring in 2021. A positive
trend in the total number of species, including Red Data and restricted species, has been recorded over the last five years. Our
operations are noted as having a minimal impact on biodiversity on site.
Partnering to preserve biodiversity
Gem Diamonds is a member of the United Nations Global Compact and supports the SDGs. SDG 17 (Partnering for the Goals)
recommends partnering to achieve goals and strengthen the means of implementation.
Partnerships play a critical role in our biodiversity protection work. We identified a network of interested and affected
stakeholders to consult and work with to optimise our biodiversity stewardship work. These partners range from communities
and local traditional leaders, to subsistence farmers and government departments.
Our partnerships with local subsistence farmers include implementing rotational grazing and veld management programmes
to ensure that rangelands outside of the mine lease area are protected from overgrazing, and that overgrowth in these areas is
managed.
Gem Diamonds’ innovative strategy to sustain biodiversity within our mine lease areas preserves the natural environment and
promotes the ecosystem services in these unique bioregions. Our strategy aims to protect and manage natural habitats in a
way that ensures “no net loss” of biodiversity.
In support of our biodiversity protection ambition, we established “no-go areas” in mine lease areas. These areas are protected
from development or disturbance by mining activities.
We work to prevent the loss of plant species through a rescue and relocation procedure – named the Priority Plant Relocation
Procedure. We helped establish a high-altitude rescue plant garden and seed storage facility in Lesotho with the most
comprehensive native seed collection in the country.
Our biodiversity protection initiatives have shown excellent results, with previously threatened plant species establishing
thriving colonies in the Letšeng mine lease area. The spiral Aloe, threatened to near-extinction due to poaching and
overgrazing, has established a footprint in the Letšeng mine lease area, the only place in Lesotho where its numbers are
increasing.
Wetlands are considered priority ecosystems in the Drakensberg Afro Alpine Region. We partnered with the Government of the
Kingdom of Lesotho and other stakeholders to protect these important ecosystems by constructing new wetlands and
rehabilitating existing wetlands in the Khubelu valley.
Livestock overgrazing and trampling are major challenges in this regard, affecting the rate of erosion of the wetlands.
Overgrazing harms wetlands through soil compaction, removal of vegetation and stream bank destabilisation. Wetlands offer
excellent forage for livestock and provide a water source and cover, so livestock tend to spend a disproportionately large
amount of time there.
Proper management of wetlands rests on effective rotational grazing to allow the wetlands to rest. The initial stages of the
wetlands biodiversity protection project involved educating local herdsmen about sustainable grazing practices and ensuring
that areas are grazed evenly, to decrease the risk of erosion. Following better grazing practices, the environmental conditions
are expected to improve, allowing wetlands to rehabilitate and sustain naturally.
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SOCIAL
The Group’s purpose – “Produce the best diamonds, in the best way, leaving a lasting legacy” – is directly underpinned by three
key strategic priorities: Extracting Maximum Value from Our Operations, Working Responsibly and Maintaining Our Social
Licence, and Preparing for Our Future.
Our social licence to operate depends on regular engagement with all stakeholders, including government, local communities,
employees and other interested parties, 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 must establish CSRI projects that continue to create value for stakeholders in our absence. We want to
leave a positive legacy in the countries in which we operate through contributing to local economies, maximising local
employment and procurement, and developing sustainable CSRI projects. We take an integrated approach to achieving this; we
understand how the issues of sustainability, society and the environment are inextricably linked.
RELATED SUSTAINABILITY PRINCIPLES
Prioritising environmental protection
Optimising socio-economic benefit
Prioritising the development and well-being
of our employees
RELATED UN SDGs
While our CSRI activities focus on PACs at our operating mine in Lesotho, where the need is greatest, we acknowledge that we
are part of a global community striving to address larger issues. To this end, we integrated the UN SDGs into our decision-making
process, with six of the 17 SDGs identified as key to our communities and organisational objectives.
The following UN SDGs relate to our social pillar:
Refer to Our Approach to Climate Change Report 2022 for more information on our approach to integrating these UN SDGs into
our business operations.
SNAPSHOT OF OUR PERFORMANCE
US$0.5 million
invested in social projects
(2021: US$0.8 million)
US$134.1 million
spent on local procurement
(2021: US$164.9 million)
Zero major or significant
community accidents
(2021: zero)
Established an agriculture
skills incubator
Zero incidents of
compromised dam integrity
(2021: zero)
Zero incidents involving
rights violations of
indigenous communities
(2021: zero)
OUR GOALS
• Build on our foundation of positive relationships with all stakeholders through continuous engagement.
• Enhance the sustainability of our small and medium-sized enterprise (SME) projects through partnerships with appropriate
non-governmental organisations (NGOs).
• Implement our needs-based CSRI programme effectively to enhance benefit to PACs.
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OUR FUTURE
• Strengthen partnerships with our PACs through CSRI initiatives that support the creation of sustainable, mutually beneficial
industries through extended support.
• Launch our second three-year UN SDG cycle and integrate this into our corporate social responsibility strategy.
• Further integrate climate-related considerations into our CSR strategy.
MATERIAL MATTERS
Safeguarding our communities
Our context
Our primary objective is to operate safely and responsibly – ensuring the safety and health of our workforce, their families and
the communities surrounding our operations.
Our Letšeng operation is located in a remote part of Lesotho’s Maluti Mountains with limited public infrastructure and
challenging transport routes. Not only does the remote location create operational challenges, but our PACs also face daily
difficulties accessing basic public services. Our responsibility as a good corporate citizen extends beyond protecting our
communities against any potential risks posed by our mining operations, but includes generating sustainable shared value that
will benefit PACs for generations to come.
During 2022, two material topics were at the centre of our engagement with stakeholders: water quality and TSF management.
Our approach
The lack of access to public services and water provision infrastructure resulted in our PACs primarily relying on surface water
sources (streams and springs) for their daily water needs, including subsistence farming, livestock and human consumption, and
hygiene. E.coli can be found in these surface water bodies, and can sometimes cause severe gastrointestinal illness (for more
information, refer to our water quality case study on page 76).
At Letšeng, our on-site clinic provides emergency and primary healthcare for community members, and our medical staff often
travel to PACs to assist community members who are not able to travel to the clinic. After noting continuing high levels of E.coli-
related gastrointestinal illness, we designed a strategy focused on assisting our PACs with safe and potable water and decent
sanitation infrastructure. This strategy protects the communities from ingesting water contaminated with E.coli as a result of
fouling in the water, and also protects the water bodies from further contamination by providing sanitation facilities. To date, we
have provided 10 schools and five villages with safe potable water and dignified sanitation facilities.
In addition to our community outreach and primary healthcare programmes, we provide emergency response and medical
assistance in the region. We leverage resources at our Letšeng operation to directly assist communities in the Mokhotlong
district. We repair and maintain national roads on behalf of the Roads Agency. In 2022, we responded to eight accidents on
public roads and treated 33 people in our clinic for trauma injuries sustained in the community villages.
The second material engagement topic in 2022 was the responsible management of our TSFs. These are an integral part of
mining operations, and they present one of the most significant potential hazards associated with the industry if they are not
responsibly managed. Recent tragedies involving tailings dam failures have placed the mining industry under intense scrutiny,
highlighting that risk management is crucial at every stage of the lifecycle of tailings facilities.
In response to these tragedies, the ICMM established the GISTM to strive to help achieve the ultimate goal of zero harm to people
and the environment, with zero tolerance for human fatality. The standard requires operators to take responsibility and prioritise
the safety of tailings facilities through all phases of a facility’s lifecycle, including closure and post-closure. It also requires the
disclosure of relevant information to support public accountability. Gem Diamonds has committed to and adopted the ICMM’s
GISTM.
We recognise that ensuring the integrity of our mining waste and freshwater storage facilities is non-negotiable and integral in
exercising our responsibility to safeguard our communities. We take a proactive approach and ensure that dam safety is
continually managed according to international best practice. Dam walls undergo stringent safety monitoring in the form of
inspections and audits, conducted both internally and externally at regular intervals throughout the year.
To protect our host communities from potential dam-related hazards, we monitor two TSFs and a freshwater dam at our Letšeng
mine: the Patiseng TSF, the Old TSF, and the Mothusi dam – our freshwater supply resource. All facilities undergo stringent
inspections on a daily, weekly and monthly basis, surveying factors including water level, beach length, freeboard and overall
structural stability. Furthermore, an early-warning system, together with community training and awareness programmes, are
used to ensure the emergency readiness of communities that could be affected in the unlikely event of a failure. The nearest
village is located 20km downstream from the mine. However, Letšeng has never had a case of tailings overflowing or breaching
of a tailings containment facility.
Refer to the Operations review on page 60 for our response to tailings management.
Our performance
• Zero incidents of compromised dam integrity were recorded in 2022 (2021: zero).
• In 2022, the Letšeng emergency team responded to 17 emergency calls (2021: 22) from PACs, of which eight were motor
vehicle-related (2021: 13).
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Ensuring positive engagement with our stakeholders
Our context
The strength of our relationships with stakeholders, particularly employees, regulators, PACs and host governments, ensures our
social licence to operate. These relationships depend on the 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 stakeholders’ needs. Our decision-making is
supported by regular stakeholder engagements, enabling us to create value for society and promote our long-term
sustainability.
Lesotho has high levels of unemployment, inequality and poverty. Our stakeholder engagement and CSI strategy guides our
Letšeng operations in responsibly and sustainably contributing to the economy and our PACs during and beyond our life of
mine.
Refer to page 17 for information about our stakeholder engagement and management.
Our approach
Our community engagement approach is informed by operation-specific SEIAs and community needs analyses, following
extensive public participation. It is aligned with host country legislation and international best practice guidelines, such as the
Equator Principles and the IFC Performance Standards on Environmental and Social Sustainability.
At Letšeng, we take a multi-level approach to stakeholder engagement. We hold monthly engagements with local community
leaders, quarterly meetings with residents of local villages, and regular forums with district-level stakeholders and leadership.
Our stakeholder engagement specialist established WhatsApp groups with local villagers for rapid, frequent communication,
enhancing the quality of our relationships and our ability to understand and proactively address issues.
We acknowledge our communities’ unique cultural and traditional context. We aim to engage transparently and respectfully; to
do so, we employ suitably qualified and trained people. We have a stakeholder consultation framework to ensure meaningful
engagement, from which we integrate feedback to guide our decision-making. Community representatives sit on the CSRI
subcommittee of the Letšeng Board, meeting quarterly to discuss the implementation and sustainability of current and planned
projects.
Topics of engagement in 2022
This past year, community engagement teams highlighted issues relating to Letšeng’s employment policy, community projects,
SME development and the mine’s emergency medical response capacity. The teams also encouraged community members to
use the formal grievance procedure if grievances arose.
An important issue raised in 2022 was the occasional breach of perimeter boundaries by community members and livestock.
These breaches pose a safety risk for community members and employees, and can affect the mine's biodiversity initiatives (refer
to page 76 for more on biodiversity). We held discussions with community members and agreed on several measures to prevent
and manage the breaches.
Our performance
• No major or significant stakeholder incidents occurred at any of our operations during 2022 (2021: none).
• No incidents involving rights violations of the indigenous people on whose land the Group operates occurred at our
operations in 2022 (2021: none).
Working with communities to understand and meet their needs
Our context
Lesotho is a developing country with high poverty rates. Approximately 81% of the Lesotho population lives on less than
US$5.50 a day, and almost 35% of the population is under-nourished. 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.
While we have a comprehensive corporate social community investment strategy focused on sustainable shared value creation,
we also contribute to our host communities through tax payments and royalties, our sustainable development investments and
local employment and procurement practices. We focus on authentic engagements to understand communities’ needs and
implement sustainable projects – in this way, we create meaningful change focused on the provision of basic services, food
security and decent work.
Our approach
We value our mutually beneficial relationships with our PACs; these relationships ensure our long-term sustainability. We comply
with regulations and legal requirements and go beyond legislated minimum requirements to make a meaningful impact and
meet communities’ needs.
We facilitate CSRI through rolling five-year strategies, informed by an independent third-party assessment of community needs.
Our strategy focuses on areas with the greatest potential for positive impact, namely, infrastructure development, education,
health, SME development and, where appropriate, regional environmental projects.
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Our most recent strategy development and needs analysis was conducted in 2021. We consulted a broad range of stakeholders
during the needs analysis process, including communities, leadership authorities, employees and relevant government
departments.
The Letšeng CSRI Committee, which includes community representatives from the Mokhotlong region, governs our CSRI
strategy. Letšeng agreed in its mining lease to allocate LSL5.0 million, or 1% of total dividends declared and paid in the relevant
financial year, whichever is the greater, to CSRI projects. These commitments are included in our mining lease agreement with
the Government of the Kingdom of Lesotho. The CSRI policy, which includes consideration of our adopted UN SDGs, outlines the
process we adopt in identifying CSRI projects and prioritising sustainable and worthy causes, as informed by a bottom-up,
community-focused approach. The governance of CSRI allows for ad hoc and responsive projects where appropriate, for
example, to allow for effective responses to emergencies, such as flooding.
Our performance
▪ CSRI investment of US$0.5 million (2021: US$0.8 million).
▪ To date, Letšeng Diamonds has awarded 51 scholarships to young Basotho citizens to study in the fields of mining,
engineering, emergency medical care and finance. 48 have graduated successfully and 26 are employed full-time at the
mine.
▪ We constructed perimeter fencing and ablution facilities at Mapholaneng High School in late 2022.
▪ We constructed 50 toilets and a water storage and supply scheme at Ha Moroke village, which had no access to clean water
or sanitation facilities.
▪ Construction began on classrooms and toilets at Nthlolohetsane Primary School, due for completion in 2023.
▪ The egg circle projects in Tlokoeng and Mokhotlong were commissioned in 2022.
▪ We established an agriculture skills incubator with specialist input to mentor and guide egg farmers.
▪ Milk production has increased at the Dairy Project due to the addition of 13 Holstein cows in 2022, and the establishment of
a dairy farming incubator to support the project.
Enhancing our support for flagship projects
Our flagship projects are intended as income-generating enterprises that become self-sustaining without the long-term
support of the Letšeng mine.
The projects we supported before 2020 are self-sustaining. However, COVID-19 had a devastating impact on projects that were
in the process of development and handover to communities.
In 2022, we engaged the services of project-specific NGOs to provide business incubation support for these initiatives. The
NGOs offer mentorship and guidance and help to set up the necessary structures to support sustainability. Organisational
development experts transfer governance, accounting and administrative skills to the members of the associations that oversee
the projects, and subject matter experts develop programmes to enhance productivity.
The success of this approach resulted in the refinement of our flagship project model to involve ongoing partnerships with
NGOs and subject matter experts.
Supporting our communities through localisation to create shared value
Our context
Localisation is key to embedding shared value for our host countries and communities. Gem Diamonds contributes to shared
value by employing people from our PACs and engaging with local businesses in our supply chain. This enables us to contribute
meaningfully to the socio-economic development and well-being of our communities while meeting our business needs.
Our approach
Letšeng is a significant contributor to Lesotho’s economy. We provide jobs for more than 1 500 locals and support socio-
economic development through our focused local procurement strategy. Wherever possible, we recruit locally and match locally
available skills with operational requirements. Where local skills shortages are noted, we utilise our scholarship and internship
programmes to ensure future skills availability. We purchase goods and services from local suppliers who comply with the
necessary standards while helping these entrepreneurs develop their businesses.
Our performance
• 98% of Letšeng’s workforce comprises Lesotho nationals (2021: 98%).
• Group in-country procurement was US$134.1 million (2021: US$164.9 million), of which US$2.4 million was procured directly
from PACs (2021: US$3.4 million) and US$30.0 million (2021: US$31.4 million) from communities around Letšeng.
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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 help to uplift these communities, advancing their economic, environmental
and social sustainability potential while promoting practices that protect human rights.
Our approach
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. It
allows indigenous communities to give or withhold consent to a project that could affect them or their territories.
We align our community engagements and CSRI projects with international best practice and sustainability principles. Our
informed approach applies information gathered from community needs analyses and SEIAs. Assessments include extensive
public participation to understand our PACs’ needs and concerns.
Our goal is to minimise adverse mining impacts while identifying opportunities for positive outcomes. Our SEIAs involve
biodiversity surveys, soil, water and air quality studies, archaeological surveys, visual and socio-economic impact assessments
and an extensive public participation process.
Our performance
• Zero incidents involving rights violations of indigenous communities (2021: zero).
• Zero major or significant community grievances lodged in 2022 (2021: zero).
• Engagement with PACs through established and enhanced forums in a safe and responsible manner.
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EMPLOYEES
We provide a safe environment to ensure the health and safety of our employees, their families and our surrounding
communities.
We promote equality, diversity and professional development for employees at every business level, with attention to their
physical and psychological well-being.
RELATED SUSTAINABILITY PRINCIPLES
Creating a safe and healthy working environment
Prioritising the development and well-being of our
employees
Optimising socio-economic benefit
RELATED UN SDGs
In 2022, we completed the final year of our first rolling three-year UN SDG cycle to embed the adopted goals into our systems,
processes and decision-making.
The following UN SDGs relate to our employees pillar:
Refer to Our Approach to Climate Change Report 2022 for more information on our approach to integrating these UN SDGs into
our business operations.
SNAPSHOT OF OUR PERFORMANCE
Zero fatalities (2021: zero)
Three lost time injuries (LTIs) (2021:
six)
LTIFR: 0.13 (2021: 0.24)
Gem Diamonds won the Junior ESG
Award for Health & Safety at
the 2022 Mining Indaba
All injury frequency rate (AIFR):
0.70 (2021: 0.93)
US$45.3 million spent on
employee remuneration and benefits
(2021: US$37.4 million)
Letšeng retained ISO 45001
certification (Occupational Health and
Safety Management)
Women in senior
management increased from 28%
in 2021 to 38% in 2022
72 697 proactive safety
management actions
(2021: 67 599)
OUR GOALS
• Implement our LetšGem employee communication platform.
• Further advance employee engagement forums to provide meaningful outcomes.
• Drive diversity and inclusion.
OUR FUTURE
• Focus on training and skills development.
• Further develop our employee value proposition.
• Enhance skills development and communication technology platforms.
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MATERIAL MATTERS
Providing a safe working environment
Our context
The remote location of Letšeng contributes to its unique operating environment and occupational health and safety challenges.
Our primary objective is to safeguard the health and safety of our employees and surrounding communities by integrating
specialist knowledge, rigorous planning and exceptional leadership into a holistic health and safety risk management system
that considers all stakeholders to embed a culture of zero harm.
Our approach
Our goal of zero harm is grounded in our belief that every injury is preventable and underpinned by a culture of care and
accountability that is driven by each employee and advocated for by every leader. We 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.
Health and safety strategy and safety culture maturity journey – 2021 to 2023
The Bradley curve measures four phases of organisational safety culture maturity: “reactive”, “dependent”, “independent” and
“interdependent”. As an organisation moves along the curve from reactive to interdependent, it marks progression from
externally motivated compliance to internally motivated, team-driven commitment.
In 2022, Letšeng partnered with an external safety expert to assess organisational safety maturity as a foundation of our focused
programme for safety performance improvement. The safety performance improvement strategy is aimed at progressing the
organisational safety culture maturity along the Bradley curve to further embed a culture of zero harm with each employee at
Letšeng. We conduct interim assessments to monitor the progress we are making and amend our occupational health and safety
systems for appropriateness in relation to organisational safety maturity.
In partnership with subject matter experts, the following safety-focused programmes were implemented during 2022:
Leadership visibility and accountability
We implemented a management-specific leading indicator programme, monitored through the newly established Safety
Committee. The Safety Committee members include senior management from Gem Diamonds and Letšeng, and subject matter
experts (internal and external) are invited as appropriate. Our coaching programme partners senior site management with
leading safety experts for mentorship on interdependent safety culture, effectively identifying risks and mitigating against
industrial blindness.
We developed a training programme for our health, safety and environmental representatives, supervisors and line managers,
focused on embedding effective safety leadership and the principle of being one’s “brother’s keeper”. During 2022, we invited
external safety experts to join our visible felt leadership engagements and identify opportunities to bolster the effectiveness of
these sessions, including walkabout inspections, toolbox talks and over inspections.
Safety compliance
We take a firm stand against non-compliance, with high safety standards for employees, contractors and sub-contractors. During
2023, we relaunched our Life Saving Rules – a set of critical safety parameters – and implemented a Just Culture Procedure to
drive accountability and consequence management for non-compliance with safety rules and procedures. We established a
recognition and reward programme to recognise individuals and teams who live the culture of zero harm and elevate learnings
throughout the organisation. In 2022, our TSF management contractor was recognised for achieving 11 LTI-free years, and our
mining contractor achieved two LTI-free years.
Critical control management
In 2022, key employees completed a critical control management programme through the University of Queensland. The
learnings from this programme were leveraged to design a critical control strategy for the Letšeng mine. The two-year strategy
analyses the critical safety risks and controls at the operation to mitigate these risks. Through the strategy, we are analysing
existing controls to focus efforts and resources on bolstering the effectiveness of critical controls to prevent risks from becoming
incidents. The Letšeng operation focused on two risks in the mining operations in 2022: equipment loss of control and fall of
ground.
Our performance
• Zero fatalities (2021: zero).
• Gem Diamonds received the Junior ESG Award for Health & Safety at the 2022 Mining Indaba for its Stop for Safety campaign
during 2021, which was led by senior executives and targeted the root cause of safety incidents.
• AIFR: 0.70 (2021: 0.93).
• Three LTIs across the Group during 2022 (2021: six), resulting in a Group-wide LTIFR of 0.13 (2021: 0.24).
• Zero restricted work injuries across the Group during 2022 (2021: one).
• ISO 45001 certification retained at Letšeng.
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Attracting and retaining qualified people
Our context
Skills shortages in the mining sector – exacerbated by our remote location, as we strive to recruit and employ locally – elevate
our focus on being an employer of choice. Gem Diamonds invests considerable resources in attracting and retaining talent, skills,
expertise and experience through an enhanced employee value proposition.
Our approach
Our strength is in the quality of our people. To attract and retain talented individuals, we continually seek to understand and
address employee needs, offer market-related salaries, cultivate a supportive working environment and offer career
development opportunities.
Employee value proposition
We continually review our employee value proposition (EVP). In 2022, the Board reviewed the makeup of the EVP, finding it to be
fit for purpose. Letšeng remains an employer of choice in Lesotho, and we see a consistently low turnover rate throughout the
Group.
In 2023, the Board will examine how the Group’s compensation and benefit programmes consider employee needs beyond fair
and equitable remuneration, and whether there are additional human capital matters which ought to fall under its remit.
Recruitment to support localisation policies
Lesotho’s small population is an ongoing challenge in terms of our ability to successfully pursue our succession planning,
diversity and localisation goals. We continue to find ways to broaden our recruitment pool. In 2022, we extended the reach of our
recruitment practices via an online recruitment platform to reach Lesotho nationals who reside outside the country. When we
note long-term skills shortages in specialist fields, we tailor our scholarship programme to address these shortages in the longer
term.
Diversity
The Board is increasingly focused on the diversity of the Gem Diamonds workforce and consequent measures to enhance
inclusion, with gender diversity being a matter for particular attention. Lesotho’s small population, Letšeng’s remote location,
and historical attitudes to the role of women in the workplace – specifically within the mining industry – challenge our ability to
increase the representation of women.
Despite this, initiatives implemented in 2021 and 2022 have started to bear fruit:
• We focus on the female experience in the workplace to identify and address potential barriers to promotion, retention and
advancement.
• We make it clear in our recruitment campaigns that we encourage female applications and support female candidates.
• We appointed a bias challenger to our interview panels who monitors possible unconscious bias during the process.
As a result, the representation of women in senior management increased from 28% in 2021 to 38% in 2022.
In 2022, we reviewed our Diversity, Equality and Inclusion Policy (DE&I Policy) to identify initiatives that could encourage diverse
appointments. Several initiatives are planned for 2023 to support this drive:
• We will schedule unconscious bias training for interviewers.
• We will hold talks at local schools to inform young women of the roles available for them in mining, and the possibility of
pursuing careers in subjects like mining and engineering.
• We will institute mentorship opportunities for women in the organisation.
• We will include a rotational component in our development programmes so that women are exposed to different areas of
the mine.
Remuneration
We recognise that competitive remuneration plays a significant role in attracting and retaining qualified people. We provide
market-related remuneration without discrimination based on race or gender, and ensure that our lowest-graded employees are
remunerated above the minimum wage of the host country. As 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, none of the workforce at Letšeng was compensated at the operation’s minimum wage in 2022 (2021: 9.9%). In 2022, the
lowest-graded permanent employees at Letšeng received 11% above the construction sector’s minimum wage (2021: 55.6%).
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.
Our Committees at Group and subsidiary levels review current remuneration policies, skills and succession planning.
Furthermore, we include non-financial metrics in employee and leadership scorecards in line with our sustainability goals.
PERFORMANCE REVIEW
84
Of our permanent workforce at Letšeng, 100% of employees subscribe to the mandatory Company retirement provision scheme
(2021: 93%). Letšeng contributes 7.5% (2021: 7.5%) of employees’ annual salaries to this scheme, and employees contribute 7.5%
(2021: 7.5%). Fixed-term contract employees are not eligible for this benefit but are paid a fixed-term contract allowance at 20%
(2021: 20%) of their basic salary. Employees at our Ghaghoo mine receive a statutory gratuity payment upon contract
completion, equal to 15% (2021: 15%) of the 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 (2021: 25%).
Our performance
• 362 employees (2021: 353) and 1 172 contractor employees (2021: 1 305) at year end.
• The average number of employees was 371 (2021: 354), and the average number of contractor employees was 1 241 (2021:
1 317).
• US$45.3 million was spent on employee wages, benefits and incentives (2021: US$37.4 million).
• The Group-wide absenteeism rate was 1.3 days per person (2021: 4.5 days).
• 4.8% Group-wide voluntary staff turnover (2021: 2.3%).
• Zero cases of discrimination were recorded (2021: zero).
Employee demographics (%)
1
Gender Localisation Age
2022
Male Female
Local
employees
2
<30 31-50 >50
Board
3
71 29 43 0 0 100
Senior management
62 38 92 0 54 46
Middle management
78 22 98 5 83 12
Total
78 22 98 7 79 14
2021
Male Female Local <30 31-50 >50
Board
71 29 43 0 0 100
Senior management
72 28 100 0 67 33
Middle management
79 21 89 6 75 19
Total
78 22 98 7 76 17
1
Represents own employees up to senior management level and own as well as contractor employees for middle management level .
2
Proportion of employees hired from the local region within which the Company operates..
3
The Board demographic represents the Gem Diamonds Limited Board in the UK, all other demographics refer to Group wide operations.
Providing learning and 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
Training and development
We invest in the training and development of our employees, identifying skills shortages to implement relevant development
programmes and focused succession planning. We train and develop our employees through various internal and external
programmes and have a well-established mentorship culture. 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.
Existing training and development continued for all Gem Diamond employees in 2022, and we worked to identify opportunities
to enhance these processes and improve ease of access to training platforms.
We introduced a comprehensive Manager’s Development Programme to address gaps in the standard development pathway.
Managers went through a detailed assessment process where gaps were identified, and specific, targeted and personalised
interventions were established to address these gaps, for hard and soft skills.
The process yielded valuable lessons in how development programmes can best be structured, allowing resources to be
efficiently allocated and employees to control their development pathway.
Succession planning
We continued to work to ensure that our succession planning processes are correctly focused. Issues of skills allocation, resource
allocation and succession planning are integrated with the mine plan and holistically considered by the Board.
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Internship programme
Our internship programme, established in 2009, focuses on offering practical field experience for new graduates. To date, we
have interned 48 graduates of our scholarship programme and offered 53% of these interns’ permanent employment.
Our performance
• Senior management training: 816 hours (2021: 209 hours).
• Middle management training: 4 848 hours (2021: 4 503 hours).
• Non-management training: 19 264 hours (2021: 28 982 hours).
• Employee career reviews performed: 9% (2021: 14%).
• 16% of female employees received career reviews (2021: 20%).
• 10% of male employees received career reviews (2021: 11%).
Caring for our employees’ health and well-being
Our context
Improving employee health and wellness increases morale, reduces absenteeism and enhances 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 provide access to tailored counselling and engagement
programmes to help employees prioritise mental well-being.
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 social licence to operate.
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 slightly higher than in 2021. No cases of malaria or cholera
were reported at our operations for the fifth consecutive year.
An enhanced physical and mental health programme supports our workforce in coping with additional pressures, with employee
wellness services and counsellors available to all employees.
COVID-19
Since we commenced our COVID-19 response and prevention plan at the end of Q1 2020, the Group has invested US$1.8 million
towards detecting and preventing infection.
Letšeng’s vaccination rate is 99.9%. One employee remains unvaccinated based on a medical exemption. The high vaccination
rate and reduced risk of infection guided the Group to review testing and screening protocols. While vaccination remains
mandatory for access to the Letšeng mine, screening has been revised to symptom-based testing. Protocols will continue to be
adjusted based on changing regulations, number of infections and risk to employees and business continuity.
Our performance
• Fully equipped clinic at Letšeng to deal with on-site and occupational medical needs.
• 100% pre-employment medical examination rate at Letšeng (2021: 100%).
• 100% exit medical examination rate at Letšeng (2021: 100%).
• Increase in occupational health cases to 430 (2021: 348).
• 3 617 serious disease prevention and management interventions (2021: 7 232).
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 approach
Frequent engagement and communication is critical to cultivating a collaborative working environment that facilitates the
development and retention of employees. Our approach to employee engagement continues to evolve in line with best practice
and our unique circumstances.
We aim to address employee grievances swiftly and to proactively engage with our employees and their elected representatives
to facilitate this.
Our management team frequently engages with our workforce through multiple forums, including daily toolbox talks, weekly
visible felt leadership visits, town hall meetings and newsletters.
PERFORMANCE REVIEW
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We maintain a freedom of association policy, and our employees can join unions and other collective-bargaining organisations.
We have established policies and procedures to guide our operations which 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 policies and procedures.
Employee Engagement Committee
Detailed engagement with our workforce occurs primarily through our newly formed Employee Engagement Committee, which
meets throughout the year. Employee representatives contribute mine-wide issues to the agenda ahead of time, and the
resulting discussions, and any matters brought from the floor, are reported verbatim to the Board for consideration. The Board
monitors actions put in place by management to address identified issues.
The Employee Engagement Committee meetings are chaired by Mazvi Maharasoa, a non-Executive Director. The format has
proven successful, with initiatives such as LetšGem arising directly from issues raised within the forum.
The following issues were raised through the Committee:
• A request for additional communications channels (refer to our LetšGem case study below).
• A request for clarification of the whistleblowing process, resulting in an awareness roadshow to explain how to use the hotline,
how matters are addressed and how anonymous statistics are reported.
• A request for additional recreational capacity at the mine aligned with planning for the construction of the recreation centre.
The Chair of the Remuneration Committee also attended a session and spoke about how executive remuneration aligns with the
wider Company pay policy.
LetšGem
One issue raised by employee representatives within Gem Diamonds’ newly formed Employee Engagement Committee was
that current Company communication channels were outdated and messages did not always reach the workforce as intended.
The employees indicated a lack of understanding of their place and value in the business and how external matters (such as the
Ukraine conflict and the impact on fuel prices) affect each individual. They further expressed a need to understand how each
one of them can make a difference in their own way to contribute to the bigger picture envisaged by the Group. Employees
requested that communication be conducted through a social media/workforce portal in a manner that is quick, visual and up
to date with current technological applications. In response, we introduced a digital employee communications platform in late
2022, dubbed LetšGem.
LetšGem is a smartphone-based, two-way communication app which allows for modular expansion. Smartphone penetration
within the Gem Diamond workforce is approximately 95%, so this is one of the best communication methods in this context.
The app was developed to enable communication on matters of interest and importance to employees.
Topics include CSRI successes, Company events, environmental news, and a popular series of employee profiles that humanise
and provide a new perspective on co-workers. Certain content can be shared via social media.
Employees are also introduced to international teams, reinforcing the sense of working in a multinational organisation with a
vibrant value chain.
LetšGem has proven its value; it provides a crucial source of truth on critical issues and allows for direct feedback from
employees. The app will evolve in response to employee usage and feedback. We expect functionality such as training,
organisational and personal development modules, pulse-checks and micro-surveys to be rolled out in 2023.
Our performance
• Zero strikes or lockouts were recorded in 2022 (2021: zero).
• Instituted the Employee Engagement Committee process.
• Launched the LetšGem employee communication platform.
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CHAIRPERSON’S INTRODUCTION
TO CORPORATE GOVERNANCE
FOCUS AREAS 2022
At Gem Diamonds, we take our responsibility as stewards of the interests of shareholders seriously. During 2022, the Board
maintained its practice of continuously searching for opportunities to improve the Group’s corporate governance processes and
policies and focused on the following areas:
• Improving the organisational safety culture and reducing the number of safety incidents.
• Conducting an external Board effectiveness review.
• Developing a capital allocation policy to define returns to shareholders, including approving the share buyback programme.
• Balancing shareholder returns against conserving cash for developing options to extend the operating life of Group assets.
• Overseeing the adoption and implementation of TCFD recommendations across the Group.
• Defining an appropriate decarbonisation strategy for the Group.
• Enhancing risk management systems and processes.
• Advancing sale and other exit options for the Ghaghoo mine.
• Maintaining disciplined financial control.
• Overseeing the going concern and the viability statements of the Group.
• Clearly defining and articulating the employee value proposition and employee benefits offered across the Group.
• Approving the approach and budget for the Underground Feasibility Study.
• Overseeing the delivery of CSI commitments and activities.
We believe that good corporate
governance leads to ethical business
practices, which in turn lead to trust and
respect from stakeholders.
Harry Kenyon-Slaney
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Factoring others into decision-making
Fair shareholder engagement
• Engagement (page 17)
• Conflict of interest (page 101)
Long-term consequences
• Capital allocation (page 55)
• Business model (page 8)
• Risk appetite and risk (page 36)
Ethical business conduct
• Culture, values and purpose
(page 4)
• Anti-bribery and corruption
(page 99)
• Human rights (page 98)
• Tax policy (page 55)
Employee interests
• Engagement (page 17)
• Diversity (page 104)
• Remuneration (page 119)
Ethical business conduct
• Climate change (page 25)
• Sustainability (page 64)
Other stakeholder interests
• Other engagement (page 17)
• Supply chain (page 20)
• Payments to governments (page
209)
PRINCIPAL DECISIONS 2022
Refer to our Committee reports on pages 108 to 141, which give more detail regarding the major decisions taken by Board
Committees as part of their mandate of support to the Board.
GOVERNANCE
The Group complied with the provisions set out in the 2018 UK Corporate Governance Code in 2022. Gem Diamonds consistently
applied the principles of good governance contained in the Code and voluntary disclosures in relation to the Miscellaneous
Reporting Regulation during the year. Our 2022 Compliance Statement is available on page 92.
TRANSPARENT REPORTING
The Board and reporting team have applied their minds to ensure the Annual Report and Accounts 2022 are transparent and
provide meaningful disclosures on our activities and on the way we manage our business. We welcome any feedback or further
information requests.
FUTURE FOCUS AREAS 2023
The primary Board focus for 2023 is the continued health and safety of our workforce and PACs. We will continue to oversee the
implementation of further initiatives to maintain our good safety record and entrench an enhanced organisational safety culture.
We will endeavour to at all times maintain a constructive, open and honest dialogue with representatives of the governments of
both Lesotho and Botswana, whom we regard as important stakeholders in our business.
We will listen and respond to our stakeholders’ needs and concerns, as informed by input received from the Sustainability
Committee. This will include views from our Employee Engagement Committee, which was established in 2022.
In 2023, we will continue to oversee the implementation of our TCFD adoption journey and decarbonisation strategy. We will
track our carbon footprint with a view to embarking on a path to lower it each year where reasonably possible. In 2023, this will
specifically include determining how we can begin accessing sources of renewable energy and accelerating our decarbonisation
journey.
Our Audit Committee will continue to focus on assessing principal and emerging risks and the quality and effectiveness of the
external audit. A significant focus area for the Committee will be to oversee the tender process and recommend the appointment
of the new external auditor for 2024.
Succession planning for Board and Executive Management is crucial. We acknowledge the value of having competent and
experienced leadership and 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 105. Outcomes will be actioned in 2023.
GOVERNANCE
90
FURTHER ENGAGEMENT
My fellow Directors and I will be available at the 2023 AGM on 7 June 2023 to respond to any questions our shareholders may
have on this report or on any of the Committees’ activities. I look forward to engaging with those shareholders who are able to
attend.
We welcome discussions with shareholders regarding 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, analyses 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
business outlook (refer pages 21 to 24).
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 (refer pages 36 to 42).
Sustainability Committee
Provides assurance to the Board that appropriate systems and policies are in place to identify and responsibly manage
sustainability-related matters (refer pages 64 to 88).
External assurance
Provided by audits and certification in accordance with international management standards.
Organisational culture
The Board sets the ethical tone for the Group and ensures that our Group’s organisational culture aligns with our purpose and
values (refer page 4).
Stakeholder engagement
The Board tracks stakeholder engagement to ensure the Group is informed of key stakeholders’ main concerns and interests
(refer pages 17 to 20).
SECTION 172(1) STATEMENT
The Board of Directors confirms that during 2022, it has acted to promote the long-term success of the Group 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 Group’s employees;
c. the need to foster the Group’s business relationships with suppliers, customers and others;
d. the impact of the Group’s operations on the community and the environment;
e. the desirability of the Group maintaining a reputation for high standards of business conduct; and
f. the need to act fairly between members of the Group.
Harry Kenyon-Slaney
Chairperson
15 March 2023
Presenting the Gem
Diamonds Annual Report
and Accounts 2022
Strategic
report
Performance
review Governance
Directors’
report
Financial
statements
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governments
Additional
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Gem Diamonds Limited Annual Report and Accounts 91
GOVERNANCE
AT A GLANCE
As a Board, we acknowledge our role in ensuring Gem Diamonds’
success by directing the Group’s affairs while representing the
interests of its shareholders. We oversee that management
focuses on the Group’s commercial needs while acting responsibly
towards its employees, communities and society as a whole.
HIGHLIGHTS AS AT 31 DECEMBER 2022
Board and committee meeting attendance
100%
Board independence
57%
Board ethnic minorities
29%
Board gender diversity
29%
UK CORPORATE GOVERNANCE
CODE – COMPLIANCE
STATEMENT
The Board confirms that for the year ended 31 December
2022, the Company fully complied with all provisions of the
UK Corporate Governance Code 2018 (the Code). Page 96
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 2022.
• Oversaw the implementation of phase 2 of the TCFD
adoption roadmap.
• Proposed the 2021 dividend for approval at the June 2022
AGM.
• Approved the share buyback programme.
• Reviewed progress with the core drilling programme and
the Underground Feasibility Study.
• Defined an appropriate decarbonisation strategy for the
Group.
• Decided to proceed with the assessment of renewable
energy solutions, with key decisions and milestones to be
decided in 2023.
KEY GOVERNANCE ACTIVITIES
• Conducted an external Board effectiveness review.
• Monitored the Group’s cash preservation and cash generation initiatives.
• Oversaw, interrogated and approved the annual strategy review.
• Reviewed and debated key risks and mitigating actions with management.
• Evaluated the employee value proposition and benefits throughout the Group and oversaw diversity and inclusion
throughout the Group.
• Oversaw the advancement of the Group’s sustainability objectives, including the progress with the adoption of TCFD
recommendations and the Group-wide decarbonisation strategy.
• Oversaw the Group’s alignment with the ICMM's GISTM on tailings facility management.
GOVERNANCE
92
Governance framework
The Board
The Board is responsible for the overall conduct of the Group’s business, with its primary focus as follows:
• Determining the Group’s vision, purpose and values to guide and set the pace for its current operations and future
development
• Establishing the overall strategy and satisfying itself that these are aligned with the Group’s culture
• Ensuring 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
• Exercising accountability to shareholders and being responsible to relevant key stakeholders
• 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
page 21 page 36 page 91
Delegation of certain matters to Board subcommittees
There are six formally constituted Committees of the Board, each of which has specific terms of reference.
Audit Committee
(page 114)
Reviewing and
monitoring:
• The integrity of the
financial and
narrative statements
and other financial
information 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
Nominations
Committee
(page 108)
• Lead and ensure a
formal, rigorous
and transparent
procedure for the
appointment
of new directors to
the Board
• Ensure Board
composition is
regularly reviewed
and refreshed
• Oversee the
development of a
diverse pipeline for
succession
• Liaise with
Remuneration
Committee in
respect of any
remuneration
package to be
offered to any new
appointee to the
Board
Sustainability
Committee
(page 111)
• Promote a culture
of zero harm and
responsible care
• Monitor
environmental
impact and
resource
consumption
• Review and
monitor the
Group’s approach,
policies and
measures on
health, safety,
corporate social
responsibility,
climate change and
the environment
Remuneration
Committee
(page 119)
• 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
• Ensure executive
remuneration is
aligned to purpose,
values and
attainment of long-
term strategy
Standing and Share
Scheme Committees
Facilitate the
administration of the
Board’s delegated
authority.
Executive Directors and management
The Board delegates the execution of strategy and the day-to-day management of the business to the Executive Directors
and management.
Presenting the Gem
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and Accounts 2022
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report
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Gem Diamonds Limited Annual Report and Accounts 93
DIRECTORATE AND
EXECUTIVE MANAGEMENT
1. HARRY KENYON-SLANEY (62) 2. MICHAEL LYNCH-BELL (69)
3. ROSALIND KAINYAH (65)
Independent non-Executive Chairperson
BSc Geology (Southampton University),
International Executive Programme
(INSEAD France)
Chairperson
Member
Member
Independent 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
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
Committee Icons
Audit
Remuneration
Nominations
Sustainability
4. MAZVI MAHARASOA (53)
5. MIKE BROWN (62)
Non-Executive Director
LLM International and Commercial Law
(University of Buckingham)
Member
Independent non-Executive Director
BSc Engineering; Mining PR Eng (ECSA)
Engineering (University of
Witwatersrand); Strategic Executive
Programme (London Business School)
Chairperson
Member
Member
GOVERNANCE
94
6. CLIFFORD ELPHICK (62) 7. MICHAEL MICHAEL (52)
Chief Executive Officer
BCom (University of Cape Town); BCompt
Hons (University of South Africa)
Chief Financial Officer
BCom Hons (Rand Afrikaans University);
CA(SA)
8. GLENN TURNER (62) 9. BRANDON DE BRUIN (51) 10. JACO HOUMAN (48)
Chief Legal and Commercial Officer and
Company Secretary
BA; LLB (University of Cape Town); LLM
(Cambridge)
Chief Operating Officer
BCom; LLB (University of the
Witwatersrand); Attorney (South Africa)
and Solicitor (England and Wales)
Senior Manager – Technical and Projects
B.Eng(Met) (University of Pretoria); MBA
(University of Witwatersrand Business
School)
Non-Executive Directors
Executive Directors
Executive Management
KIKI CONSTANTOPOULOS (43) MINELLE ZECH (48)
Group Financial Controller
BCom Hons (University of the
Witwatersrand); CA(SA)
Group Human Resources Executive
BCom HR (Potchefstroom University)
Presenting the Gem
Diamonds Annual Report
and Accounts 2022
Strategic
report
Performance
review Governance
Directors’
report
Financial
statements
Report on
payments to
governments
Additional
information
Gem Diamonds Limited Annual Report and Accounts 95
CORPORATE GOVERNANCE
STATEMENT
HOW THIS SECTION IS STRUCTURED
The Governance section aligns with the structure and Principles (A to R) of the UK Corporate Governance Code 2018 (the Code)
and illustrates how we have applied the Code Principles and complied with the provisions.
1
Board leadership and Group purpose
Pages 96 to 99
A Effective Board
B Purposes, values and culture
C Governance framework and Board resources
D Stakeholder engagement
E Employee policies and practices
2
Division of responsibilities
Pages 99 to 103
F Board roles
G Independence
H External commitments and conflicts of interest
I Key activities of the Board in 2022
3
Composition, succession and evaluation
Pages 103 to 105
J Changes to the Board
K Board skills, experience and knowledge
L Annual Board evaluation
4
Audit, risk and internal control
Pages 105 to 106
M
Financial reporting
External auditor
Internal audit
N Review of the Annual Report and Accounts 2022
O
Internal financial controls
Risk management
5
Remuneration
Pages 107 to 107
P Linking remuneration with purpose and strategy
Q Remuneration Policy review
R
Performance outcomes in 2022
Strategic targets
BOARD LEADERSHIP AND GROUP PURPOSE
Effective Board
The Board comprises Directors with a broad range of appropriate expertise, knowledge and insights including extensive mining
industry experience (refer to page 214). The Board’s focus areas (refer to page 89) support the guidance of the Code by fostering
the long-term sustainability of the Group, creating and preserving stakeholder value and contributing to wider society.
The Board oversees, analyses and approves the annual strategy and business plan prepared by Executive Management. This
year’s review took place in November 2022 and assessed ongoing relevance of the strategy against the current local and global
context, the potential impact of current and emerging risks (refer to page 36) and the appropriateness of the current business
model (refer to page 8) to achieve our strategic objectives.
GOVERNANCE
96
Key areas discussed by the Board during the strategy review and business plan review included:
• Alignment of the strategic priorities with the Group’s purpose, vision, values and culture. This included approving the Group’s
revised vision and purpose.
• The strategy’s contribution to achieving the Group’s vision in 2022, including its meaningful, sustainable contributions to the
countries in which we operate.
• Progress against our TCFD adoption roadmap and definition of our decarbonisation objectives.
• Updates on the performance of the diamond market and Gem Diamonds’ position in the diamond industry.
• Opportunities to unlock value across operations, operational structure, capital restructuring, use of technology, revised mine
planning, cost efficiencies and strategic partnerships.
• The future development pathway for the Letšeng orebody.
• Initial investigations into renewable energy solutions.
• Review of corporate activities.
The Board is supported by the Board Committees, which prioritise specific areas of the business (refer to page 93) and provide
feedback to the Board through their chairs to ensure that Board meetings use time effectively.
Purpose, values and culture
Several metrics are utilised to monitor workplace culture, providing information on the Group’s collective experience and
behavioural trends to inform future focus areas. In 2022, the Board and senior management continued to promote the Group’s
sustainable success by reinforcing the purpose, values and goals. In 2022, the Board approved the Group’s new purpose and
vision.
The Board monitored strategic metrics to track 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 the workforce.
• Health and safety data.
In 2022, the Board reviewed the employee value proposition and benefits offered at all Group entities and found these to be fit
for purpose. Refer to employee and contractor engagement on page 18 for how the Board monitors organisational 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 36) 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 are in place between the Board and Executive Management, which provides ample time at Board
meetings to focus on strategy and key decisions. The information the Board receives allows for an appropriate level of detail to
inform the discussions, 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 gain deeper insights into the matter. Presentations
by external experts in relevant areas expose Directors and Executive Management to new perspectives. In 2022, we hosted the
global law firm, Linklaters, to provide insight into a number of different matters including ESG-related reporting and climate
change goals, strategy and reporting obligations.
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.
Presenting the Gem
Diamonds Annual Report
and Accounts 2022
Strategic
report
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review Governance
Directors’
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statements
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Additional
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Gem Diamonds Limited Annual Report and Accounts 97
Company Secretary
The Company Secretary has access to an independent firm of Chartered Secretaries in Public Practice (Bruce Wallace Associates).
This ensures all Company secretarial and governance issues are attended to and the Board is kept abreast 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 in the case where the Director or Group employee has acted fraudulently or dishonestly.
Stakeholder engagement
The Board recognises the importance of effective and proactive engagement with stakeholders. Pages 17 to 20 contain a
detailed analysis of stakeholder engagement during 2022.
Annual General 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 Gem Diamonds 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.
In the June 2022 AGM results announcement, the Board noted the proportion of votes cast against Resolution 13 (Resolution 13
passed with 58.55% of participating shareholders voting in favour), renewing the authority of the Directors to allot shares.
The Board acknowledges that the votes against Resolution 13 related primarily to the votes cast by a significant shareholder and
their standing policy on this matter. As noted in June, the Board was disappointed in this outcome, given that the resolution
reflected UK-listed company market practice. In view of the significant shareholder's position and standing policy on this matter,
the Board and the executive management team have not engaged further. However, we will continue to regularly consider their
approach to this matter in accordance with Provision 4 of the UK Corporate Governance Code to engage with significant
shareholders who vote against these resolutions.
The 2023 AGM will be held on Wednesday 7 June 2023 in person. Details of the resolutions to be proposed at the AGM are
included in the Notice of AGM, which will be published on the Gem Diamonds website at www.gemdiamonds.com. It will be sent
to shareholders who requested 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 2022 and the AGM documentation through the
same website.
Employee policies and practices
Employee policies and involvement
The Group prioritises the health, safety and effective performance of employees, and maintains 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 2022, she chaired the Employee Engagement Committee and held several meetings
with employee representatives.
Matters raised during these meetings were addressed at Board and management level and employees were kept up to date
throughout the process. Employees are informed about the Group’s performance and objectives through direct and ongoing
communication with management as well as the Group’s website, published information, the employee app, the circulation of
press cuttings and Group announcements.
Equal opportunity is a fundamental principle in Gem Diamonds and the Group is committed to achieving equality irrespective of
gender, religion, race or marital status. 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 excellent management and employees by creating an environment that incentivises top
performance. Guidelines and frameworks covering remuneration benefits, performance management, career development,
succession planning, recruitment, expatriate employment and the alignment of human resources management and policies are
in place and aligned with international best practice. Each operating unit manages its human resources requirements locally,
within the Group’s guidelines and frameworks.
The Modern Slavery Statement, in accordance with the Slavery Act, is updated and published on the Group website annually and
can be viewed here: https://www.gemdiamonds.com/pdf/modern-slavery.
GOVERNANCE
98
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. We uphold and comply 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 was reviewed and amended in 2022.
Refer to the Audit Committee report on page 114.
Whistleblowing programme
Independently operated and confidential toll-free phone hotlines are in place in each country where the Group operates. Online
submissions through www.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.
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.
In 2022, through the Employee Engagement Committee, employees raised concerns regarding the effectiveness of
whistleblowing channels. Based on this feedback management developed a new whistleblowing awareness roadshow that
explains how to use the whistleblowing channels and how matters raised are addressed. In addition, management developed a
new reporting mechanism to communicate the outcome of whistleblowing incidents.
During the year, there were 13 whistleblowing reports, of which all but one were resolved by year end. The two open matters
from 2021 were also resolved. The Board is satisfied that the whistleblowing programme is being used effectively by concerned
individuals and that all reports raised in 2022 were 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. This 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 93 sets out the primary role of the Board.
The Board meets regularly, covering strategic matters 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 operating the business within the parameters set by the Board. This includes producing clear, accurate and timely
information and reports to equip 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 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 2022.
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 Group’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 below.
Presenting the Gem
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Gem Diamonds Limited Annual Report and Accounts 99
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
Role of Senior Independent Director
Michael Lynch-Bell
Role of non-Executive Directors
• 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
• Scrutinises the performance of Executive Management in
meeting agreed goals and objectives and monitoring the
reporting of performance
• Reviews the integrity of financial information and
determines whether internal controls and systems of risk
management are robust
• Determines the Company’s policy for executive
remuneration, as well as the remuneration packages for the
Chairperson and Executive Directors through the
Remuneration Committee
• Ensures a satisfactory dialogue with shareholders on
strategy, remuneration policy and other relevant matters as
well as engagement with key stakeholders
• Strengthens 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
• Provides 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 to www.gemdiamonds.com/corporate-governance.php.
GOVERNANCE
100
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 Group transacts business against predetermined materiality thresholds.
The Board considers the majority of the non-Executive Directors, ie Harry Kenyon-Slaney, Michael Lynch-Bell, Rosalind Kainyah
and Mike Brown, to be independent in accordance with the Code. Mazvi Maharasoa adds extensive value to the Board, however,
under the criteria of the Code, she cannot be considered independent due to her previous role at Letšeng Diamonds. Mazvi is
only a member of the Sustainability Committee. Our Nominations Committee Report on page 108 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 Gem Diamonds in London.
External commitments and conflicts of interest
External commitments
External commitments are detailed in the Directors’ CVs on page 214.
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 Group 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 March 2023). The Group voluntarily complies with this
requirement.
Dealings in shares and the UK market abuse regime
Gem Diamonds’ share dealing policy and reporting procedures are in line with the UK Market Abuse Regulations implemented in
July 2016 and updated in June 2022.
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.
Key activities of the Board in 2022
The Board’s key activities for 2022 are linked to our three strategic priorities to deliver maximum value for all stakeholders:
Extracting Maximum Value from
Our Operations
Working Responsibly and Maintaining
Our Social Licence
Preparing for Our Future
These key activities relate to various focus areas:
Operational • Oversight of the organisational safety culture strategy implemented at
Letšeng
• Review of quarterly management reports on operational performance
• Oversight of phase 2 of our TCFD adoption roadmap
• Oversight of renewable energy assessments
• Oversight of responsible tailings facility management and alignment with
the ICMM's GISTM
• Oversight of the implementation of the CSI strategy
• Oversight of environmental conservation and stewardship performance
• Review the mapping of resources and progress on the resource drilling
programme and Underground Feasibility Study
• Review of the decarbonisation strategy and carbon-pricing model
• Review of the 2023 business plan
Presenting the Gem
Diamonds Annual Report
and Accounts 2022
Strategic
report
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review Governance
Directors’
report
Financial
statements
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Additional
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Gem Diamonds Limited Annual Report and Accounts 101
Strategy and financing • Annual strategy review in November 2022
• Review and approval of the decarbonisation targets
• Ongoing review of KPIs to assess delivery of strategy during the year
• Monitoring of the Group’s cash-preservation and cash-generation initiatives
• Proposing the 2021 dividend for approval at the 2022 AGM
• Review and approval of the share buyback programme
• Oversight of the Group’s funding commitments
• Review and approval of planned capital expenditure
• Oversight of the integration of climate change-related issues into strategy
planning
Risk management and
internal control
• Review of risk management processes and the updated risk register,
including emerging risks
• Review 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
Corporate and
performance reporting
• Regular review of financial performance and position
• Monitoring of cash flow forecasts
• Review 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 the 2021 Annual Report and Accounts, the 2022
Half-Year Report, Our Approach to Climate Change Report and Our
Sustainability Report
Governance • Conduct an external Board effectiveness review
• Annual review and update of Committee terms of reference and evaluation
of Committee composition and 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
• Review regular governance updates from the Company Secretary
• Review the matters reserved for the Board
• Review of Directors’ independence and conflicts of interest
• Monitoring the maintenance of the separation of roles between the
Chairperson and CEO
Stakeholder engagement • Oversight of the CSI strategy development and performance
• Measuring the Group’s culture through a number of metrics, including
employee engagement through a designated non-Executive Director
Meeting attendance
Four scheduled Board meetings were held in 2022. 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 the details, including supporting information
for decision-making. The decision of each Board member is communicated, recorded and ratified as necessary at the following
Board meeting. The below table notes the meeting attendance of the members of the Board and Committee meetings.
GOVERNANCE
102
Director
Board:
4 held
Audit:
4 held
Remuneration:
4 held
Nominations:
4 held
Sustainability:
4 held
Executive Board members
C Elphick 4/4 N/A N/A N/A N/A
M Michael 4/4 N/A N/A N/A N/A
Non-Executive Board members
H Kenyon-Slaney 4/4 N/A 4/4 4/4 4/4
M Lynch-Bell 4/4 4/4 4/4 4/4 N/A
M Brown 4/4 4/4 N/A 4/4 4/4
M Maharasoa 4/4 N/A N/A N/A 4/4
R Kainyah 4/4 4/4 4/4 N/A 4/4
Non-Executive Directors’ meetings
The non-Executive Directors meet independently of the Executive Directors, in accordance with the practice adopted by many
listed companies.
COMPOSITION, SUCCESSION AND EVALUATION
Board Selection and Appointment Policy
The Board’s formal Selection and Appointment Policy ensures that the procedure for appointing new Directors is formal, rigorous
and transparent, and appointments are made on merit, against objective criteria. The Nominations Committee makes
appointments based on merit while considering diversity (of gender, social and ethnic background), cognitive and personal
strengths and the specialist skill sets. Further details are in the Nominations Committee report on page 108.
There were no changes to the Board or Board Committees during 2022.
Re-election
The Nominations Committee’s report is set out on page 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 Directors enable the Board
and its Committees to conduct their respective duties and responsibilities effectively.
Board expertise, experience and knowledge
The Board undergoes an annual review of the composition and chairmanship of its primary committees, namely the Audit,
Nominations, Sustainability and Remuneration Committees. The Company adheres to the Code’s requirement 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 achieving
shareholder value. Knowledge of the diamond industry is critical to developing new business opportunities and overseeing the
Group’s sales and marketing strategies. Knowledge of financial markets is also necessary to fulfil the Group’s strategy.
The biographies, which can be found on page 214, provide more information on each Director’s competencies. All Directors
allow sufficient time to the Group to fulfil their responsibilities effectively.
The non-Executive Directors have varied experience and competencies and their unique perspectives to bring to bear on matters
of strategy, performance and resources that are critical to the Group’s ongoing success.
Board skills and experience (%)
100%
81%
81%
67%
67%
62%
62%
57%
52%
Senior management
Core industry
International markets
Financial/Audit and Risk
Environmental/Social
M&A/Capital markets
Health and safety
Legal/Regulatory
Technical/Engineering
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Gem Diamonds Limited Annual Report and Accounts 103
Diversity
The Board recognises the importance of increasing diversity, including gender and ethnic diversity, in the boardroom. In 2022,
Kiki Constantopoulos and Minelle Zech were appointed to the Executive Committee, thereby increasing the gender diversity at
this level to 38%.
The Board acknowledges that from 2023 onwards, the Group will be required by the UK’s Listing Rules to disclose whether it has
met the diversity targets specified by the Financial Conduct Authority (FCA) and, failing compliance with these targets, provide
an explanation for such non-compliance.
The Group supports diversity at all levels. In 2022 the Board reviewed the Diversity and Equality Policy to give clarity on the
increased focus on inclusion matters. The renamed Diversity, Equity and Inclusion (DE&I) Policy covers both Board diversity and
the approach across the Group. Over time, the Board has improved its diversity from a position of no female and ethnic minority
in 2018 to 29% female and ethnic minority on the Board in 2022. Pleasingly, 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
29%
Board
29%
Senior Management
38%
Senior Management
38%
Management pipeline
40%
Management pipeline
89%
Succession planning at Board and Executive Management level includes a review of skills, experience and diversity, and
consideration is given to all these areas when considering future appointments. Succession planning is a 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. Read more about our initiatives to foster diversity in our stakeholder section on page 17. Information on gender-based
employment can be found in Our Sustainability Report available at www.gemdiamonds.com.
Further detail on the Group framework on succession planning can be found in the Nominations Committee report on page 108.
Training and induction
A formal and bespoke 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
extended to Directors to refresh their skills, knowledge and familiarity with the Group. Professional development and training are
provided through the following:
• Regular updates on changes (actual and proposed) in laws and regulations affecting the Group 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.
• 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. Non-Executive Directors Michael Lynch-Bell and Mazvi Maharasoa each visited Letšeng once
during the year and Mike Brown three times. Of the Executive Directors, Clifford Elphick visited the Maseru office twice during the
year and Letšeng once, and Michael Michael visited the Maseru office once and Letšeng five times. In February 2023 another site
visit was undertaken by five of the seven Board members, including four non-Executive Directors and one Executive Director.
GOVERNANCE
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Annual Board evaluation
As per the Code, the Board must undertake a formal and rigorous annual evaluation of its own performance and that of its
Committees and individual Directors. This year, an external evaluation was conducted in Q4 2022, which was facilitated by an
independent party, Ceradas. Ceradas is a founder member of The Board Effectiveness Guild in the UK. More information on
Ceradas can be found on their website: www.ceradas.co.uk. The review was initiated by the Nominations Committee and
sponsored by the Chairperson. The main objectives were to review the effectiveness of the Board in line with the requirements of
the Code, to assess the Board’s progress since 2019 and to identify possible areas of opportunity for its further development.
The review took the form of one-to-one interviews with each of the Directors and the Company Secretary. An interview aide
mémoire was provided to all interviewees beforehand, setting out the topics and questions to be discussed. These topics
included:
• The Board and strategy.
• Oversight of business performance.
• Risks, controls and mitigation.
• Culture and stakeholders.
• Board meetings, information and papers.
• Contribution of Board members.
• Composition and succession.
• Committees and meetings.
• Chairperson evaluation.
• Challenges and progress.
The findings were consolidated into a report which, along with recommendations, was circulated to all Directors and discussed at
the March 2023 Board meeting. The overall findings from the evaluation were positive, with a number of recommendations
made regarding considering the use of facilitators to challenge the thinking of the Board in light of the important strategic
decisions to be made and brainstorming possible crisis scenarios that may arise, and the immediate response for each. Another
recommendation is that the Board should become more visible and engage more with important stakeholders, such as PACs and
the Lesotho Government.
In 2023, the Board and Committees will implement the recommendations from the 2022 evaluation and monitor its progress
against these over the following months.
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 from page 3 meets this obligation. The Responsibility Statement of the
Directors in respect of the Annual Report and Accounts 2022 is set out on page 2.
Financial reporting to the Board is regularly modified and improved to cater for evolving circumstances. The Group’s
comprehensive planning and financial reporting procedures include detailed operational business plans for the coming year and
a three-year rolling plan, and sustainability matters including climate-related risks and opportunities. 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 matters are circulated to Board members and senior
executives.
External auditor
A principle of the Code is that the Board establish formal and transparent arrangements for considering the application of
financial reporting and internal control principles and for maintaining an appropriate relationship with the Group’s external
auditor, EY SA. 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 page 114.
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 2023 AGM.
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Gem Diamonds Limited Annual Report and Accounts 105
Internal audit
The Group Internal Audit function, as an independent assurance provider, is a fundamental component 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.
Our in-house Internal Audit team is 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 2022
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 internal control system aims to manage the business risks that significantly threaten the Group’s achievement of its business
and strategic objectives, with a view to enhance the value of shareholders’ investments and safeguard assets. The internal
control systems are 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 Board-approved risk
tolerance levels. The system of internal control includes the controls over compliance with regulatory and legal requirements.
In 2022, 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. 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 page
114.
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 conducted 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 2022 are available in the CFO’s review on page 49.
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 quarterly. 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 36 to 42 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 Board. 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 enough 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.
GOVERNANCE
106
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 produce the best diamonds, in the best way, leaving a lasting
legacy.
Remuneration Policy review
Directors’ remuneration
While the Board is ultimately responsible for Directors’ remuneration, the Remuneration Committee, consisting of independent
non-Executive Directors, determines 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 119 to
141.
Performance outcomes in 2022
No adjustments were made to performance conditions set at the beginning of the year, and the formulaic Gem Diamonds
Incentive Plan (GDIP) outcome for the business scorecard was 32.9% 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. The Committee further considered the decline in the share price over 2022, and agreed
that the share price to be used to determine the number of shares under the deferred GDIP award which is to be granted in 2023
after the release of the 2022 annual results would be 50 GB pence, rather than the prevailing share price of c.31 GB pence at the
meeting when the Committee reviewed the GDIP outcome. This will have the effect of reducing the number of shares granted by
c.40%, which also implies a lower aggregate bonus for Executive Directors than that paid in 2021.
Based on the performance to 31 December 2022, 42.7% of the long-term incentive share awards made under the 2020 ESOP will
vest in June 2023, subject to continued employment at that time.
The GDIP business scorecard is shown on page 124 and the ESOP award calculation on page 138.
Strategic targets
The 2022 GDIP rewards performance in the ratio of 15% on personal factors and 85% on business performance. This 85%
business weighting aligns with the strategic focus areas:
• Preparing for Our Future (10%)
• Extracting Maximum Value from Our Operations (55%)
• Working Responsibly and Maintaining our Social Licence (20%)
More information on the GDIP scorecard is available on page 124.
Presenting the Gem
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Gem Diamonds Limited Annual Report and Accounts 107
NOMINATIONS COMMITTEE
Harry Kenyon-Slaney
Non-Executive Chairperson
The role of the Committee is to:
• Lead and ensure a formal, rigorous and transparent procedure for the
appointment of new Directors 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.
• Work and liaise with other Board Committees as appropriate, including the
Remuneration Committee, in respect of any remuneration package to be offered
to any new appointment of the Board.
Membership as at 31 December 2022:
• H Kenyon-Slaney
• M Brown
• M Lynch-Bell
Other attendees:
• C Elphick
• Secretary (Bruce Wallace Associates)
Nominations Committee skills (%)
100%
100%
89%
78%
78%
67%
67%
67%
44%
Senior executive
International markets
Core industry
Financial/Audit and Risk
Health and safety
Environmental/Social
Technical/Engineering
M&A/Capital markets
Legal/Regulatory
The Nominations Committee comprises three non-Executive Directors. 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 2022 to ensure
it was compliant with the Code.
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 engaged Ceradas, an independent party, to conduct a formal external Board evaluation in November 2022. The
outcomes were discussed at the March 2023 Board meeting. A summary of the evaluation approach and recommendations can
be found on page 105.
GOVERNANCE
108
Board composition
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 interest 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 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 2022 AGM.
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.
During the year, when reviewing whether Directors are ESG-proficient and in considering skills for new
directors as part of succession planning, specific traits and characteristics such as diversity, familiarity
with major standards and frameworks and subject matter expertise were considered. The skills and
competency matrix was amended to include these areas for future assessments.
The Committee’s succession planning review extends 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 were 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.
The Committee reviewed the Group’s Diversity and Equality Policy and amendments to the policy
clarified the increased focus on inclusion in the workplace. The policy was renamed as the Diversity,
Equality and Inclusion Policy.
In line with the commitment to increase gender diversity, the Committee oversaw the appointment of
Kiki Constantopoulos and Minelle Zech to the Executive Committee. Further to this, the first phase of
focused diversity initiatives was implemented across the Group and there was an improvement in the
diversity of the leadership pipeline through the appointment of women and minority groups to junior
and middle management positions. Further detail on the Group's diversity, equality and inclusion
approach can be found on page 104.
2022 value-adding activities Link to strategic
pillar
Presenting the Gem
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report
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Gem Diamonds Limited Annual Report and Accounts 109
Board effectiveness
The Committee considered the 2021 internal Board evaluation outcomes. The overall findings from the
evaluation were positive and demonstrated significant progress on some of the key findings from the
previous year’s evaluation. Focus areas for 2022 as highlighted by the Board were that more can be
done around succession planning and stakeholder engagement.
The Board appointed Ceradas, an independent party, to undertake a comprehensive external Board
evaluation in November 2022. The main objectives were to review the effectiveness of the Board in line
with the requirements of the Code, to assess the Board’s progress since 2019 and to consider how well
prepared the Board is for the challenges that lie ahead. The details are discussed on page 105.
The findings were consolidated into a report which, along with recommendations, was circulated to all
Directors and discussed at the March 2023 Board meeting. The Committee will monitor progress on the
implementation of the recommendations during the coming year.
The Board evaluation process reviews the current skills and experience of the members of the Board, as
well as its composition and structure. This process enables the Committee to identify what knowledge
and competencies are needed for the business in the future and it therefore supports the search process
for future Board members. It further provides assurance that the measured skills remain fit for purpose
and supports the Group strategy.
Committee membership
The Committee continued to evaluate the composition of the various Board Committees to ensure they
had the requisite skills and experience to perform effectively. It found that the Committees were
appropriately comprised and no changes were proposed to membership for 2022 . All Board
Committees are compliant with the provisions of the Code.
Future focus areas
In 2023, 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.
• 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.
• Continue to review and upskill the ESG competence of the Board and ensure succession plans
explicitly address ESG competency.
• Ensure its succession plans address the new FCA Listing Rules related to Board composition and
diversity targets.
• Monitor progress on the implementation of the recommendations of the external Board evaluation.
• Conduct an internal Board evaluation in 2023 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.
• Review its current board skills matrix to include attributes that consider multiple dimensions of
“invisible” diversity, such as expertise and experience, decision-making style, and behavioural
attributes.
2022 value-adding activities Link to strategic
pillar
Extracting Maximum Value
from Our Operations
Working Responsibly and Maintaining
Our Social Licence
Preparing for Our Future
GOVERNANCE
110
SUSTAINABILITY COMMITTEE
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.
• Monitor efforts to minimise environmental impact and improve resource use
efficiencies.
• Promote corporate social responsibility with a lasting positive impact in PACs and
host countries.
• Review existing and planned metrics and targets, performance and operational
objectives regarding climate change, decarbonisation and energy consumption.
• Review and monitor the Group’s progress towards sustainable development and
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 2022:
• M Brown
• R Kainyah
• M Maharasoa
• H Kenyon-Slaney
Other attendees:
• B de Bruin
• G Turner
• HSSE and Sustainability Manager
Sustainability Committee skills (%)
100%
83%
75%
67%
67%
67%
58%
50%
42%
Senior executive
Core industry
Environmental/Social
Legal/Regulatory
Health and safety
International markets
Technical/Engineering
Financial/Audit and Risk
M&A/Capital markets
Mike Brown visited Letšeng on three occasions during the year. These visits specifically focused on:
• Safety culture and performance.
• Tailings management.
• Risk management with regard to heavy machinery and equipment and pit safety.
• CSI projects.
• Bioremediation and water management.
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Gem Diamonds Limited Annual Report and Accounts 111
Working towards a culture of zero harm
The Committee continued to monitor critical health and safety matters during 2022, including:
• Maturing of the organisational safety culture and safety-focused leadership coaching.
• Conveyor systems safety programme.
• Tailings and freshwater storage facilities management.
• Critical control management strategy.
The Committee received quarterly reports on health and safety performance throughout the Group
with particular focus on the delivery of the organisational safety culture maturity strategy. The
Committee received regular reports on safety performance trends and incident investigation reports on
significant safety incidents, including LTIs and near-misses. The Committee received feedback on the
safety-focused leadership coaching and the measures the Group implemented to protect its workforce
through bolstered occupational health and safety systems, operating responsibly and working to
achieve its objective of zero harm. These measures included:
• Improved incident investigation and management.
• Leading indicator programme for safety trend analysis.
• “Just Culture” model development.
• Safety-focused employee engagement.
• Leadership visibility and accountability strategy.
• Critical control management strategy.
The Committee received feedback on the progress made to assess conformance of tailings facilities with
the ICMM’s GISTM and measures implemented to align existing practices with those outlined in the
standard. There were regular reports on the tailings and freshwater 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 freshwater facilities.
• Conveyor system safety audit.
• Maintenance system audit.
• Health and safety systems management.
Promoting corporate social responsibility
Corporate social responsibility matters remain a priority and the Committee focused on the following
matters during 2022:
• Completion of an updated community needs analysis.
• Delivery of a UN SDG-aligned five-year CSI strategy.
• Emergency flood response and infrastructure restoration.
• Long-term sustainability of sponsored small and medium enterprises.
• Implementation of the planned 2022 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 PACs
and received reports on the measures implemented to support CSI projects impacted by the pandemic.
The Committee received regular reports on the delivery of the 2022 CSI strategy. The strategy
specifically focused on small and medium enterprise development, education and basic service delivery
to PACs.
The Committee oversaw the voluntary membership to the UN Global Compact and submissions of the
Group’s tailings management processes in line with the Group's adoption of the ICMM’s GISTM to
promote fair and transparent stakeholder engagement and relations.
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GOVERNANCE
112
Minimising environmental impact
The Committee is pleased to report that no major or significant environmental incidents were recorded
during 2022. The Committee continues to monitor the environmental impact of the Group's operations
and oversees the various strategies aimed at mitigating this impact. During 2022 the Committee
focused on the following environmental matters:
• Stakeholder engagement regarding material 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 material environmental matters and performance against 2022
objectives related to environmental management. The Committee received feedback on the continued
successful implementation of the surface water management strategy which includes stormwater
management, water recycling and treatment measures. The Committee monitored the
2022 rehabilitation strategy review, social and environmental management plan (SEMP) update and
approved the Group update of environmental related policies.
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.
Sustainability Strategy and reporting
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:
• Progressing the TCFD adoption roadmap and developing an appropriate carbon-pricing model and
decarbonisation and energy efficiency strategy.
• Integrating the Group’s six priority UN SDGs into business strategy.
• Reporting to the Carbon Disclosure Project (CDP), Global Reporting Initiative (GRI) and the UN Global
Compact.
• Implementing 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 2023 include:
• Delivering the final phase of the TCFD adoption roadmap.
• Completion of the organisational safety culture maturity strategy.
• Commencing water treatment through bioremediation.
• Improving resource use efficiency and reducing non-mineral waste.
• Setting the 2024-2027 Group UN SDG objectives.
• Delivery of corporate sustainability KPIs.
• Advancing the Group decarbonisation strategy.
• Implementation of the 2023 CSI Strategy.
• Advancement of the Group alternative energy and energy efficiency strategy.
• Continued implementation of global best practice standards.
2022 value-adding activities Link to strategic
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Extracting Maximum Value
from Our Operations
Working Responsibly and Maintaining
Our Social Licence
Preparing for Our Future
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Gem Diamonds Limited Annual Report and Accounts 113
AUDIT COMMITTEE
Michael Lynch-Bell
Chairperson
Non-Executive Director
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 2022:
• M Lynch-Bell
• M Brown
• R Kainyah
Other attendees:
• H Kenyon-Slaney
• C Elphick
• M Maharasoa
• M Michael
• B de Bruin
• K Constantopoulos
• Financial Manager
• HSSE and Sustainability Manager
• External and internal audit
Audit Committee skills (%)
100%
78%
78%
78%
67%
67%
67%
56%
56%
Senior executive
International markets
Environmental/Social
Core industry
Legal/Regulatory
Health and safety
Financial/Audit and Risk
Technical/Engineering
M&A/Capital markets
GOVERNANCE
114
External auditor and audit effectiveness
During the year, the Committee fully considered the effectiveness, objectivity, skills, capacity and
independence of EY SA (our external auditor), considering all current ethical guidelines, and was
satisfied that all criteria were met. The 2021 auditor’s fee was approved and the 2022 fee was considered
as part of this process.
In advance of the 2022 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 were primarily
impairment of property, plant and equipment and goodwill, revenue recognition, deferred waste
stripping calculation, taxation, inventory, bank facilities, rehabilitation provisions, share-based payments
and the Ghaghoo sales process. The key audit matter during the year was the goodwill impairment as
mentioned in the Independent Auditor’s Report on page 148. 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 the Committee met with the
audit partner without members of management being present. The audit partner also 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 2021
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, the use of technology and the provision of
improvement opportunities to the management team. The Committee noted the constraints and lack of
efficiency of the audits under remote working conditions caused by COVID-19 restrictions on travel to
the mine site or finance offices due to border closures in the early months of 2022, and work permits not
being timeously granted. The Committee was satisfied that these constraints have since been
eliminated for the 2022 audit.
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 four 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 Committee was made aware that EY SA will step
down as the auditor for the 2024 financial year end as a result of mandatory firm rotation rules
applicable to South African auditors. Management will commence its tender process for external audit
firms during 2023.
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. In the previous year, 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. This investigation
continued into the current year and formed the majority of the non-audit services performed by EY
during the year. In addition, EY’s forensic department carried out a due diligence evaluation on a
supplier. These services had not been invoiced by year end. The Committee noted that both these
services are not permissible services in terms of the FRC requirements (the Group aims to comply with
these requirements), but considered the values as immaterial and the investigation for the diesel theft
and the due diligence as being the most effective way to attend to these matters. The fees for non-audit
services amounted to US$56 256. This was against the external audit fee of US$653 448, representing
8.6% of external audit fees.
Anti-bribery and corruption
The Committee reviewed and approved an updated policy during the year. There were no incidents of
bribery during the year and the Committee is satisfied that the policy remains robust regarding
compliance and diligence procedures.
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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, 13 reports were received
through the whistleblowing line and 14 reports were closed, including the two that were carried over
from 2021. One report remained under investigation at year end. The majority of the reports related to
labour practices and remuneration matters. The Committee approved the Group’s Fraud and
Whistleblowing Policy which remained unchanged from the previous year’s review. There were no
instances of fraud reported through the whistleblowing line.
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 2023 Internal Audit plan was approved by the Committee and is linked to the
current risk profile of the organisation.
Updates to the Internal Audit Charter guidelines for rating individual audit reports were approved
during the year.
The Committee assessed the effectiveness of Group Internal Audit during the year through a separate
Q&A session led by senior management without Internal Audit being present. The session 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; and
• 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.
The responses informed the Committee’s assessment of the effectiveness of 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.
Risk management and internal controls
Although the Committee maintained its oversight of the principal and emerging risks during the year, in
line with the Code’s requirements for all Board members to focus on risk management, 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:
• the availability and reliability of reliable power supply;
• the variability of cash flow;
• diamond resource and reserves;
• climate change;
• the tax uncertainty relating to the amended assessment by the Lesotho Revenue Authority; and
• tailings storage facility and freshwater dam wall safety.
The detailed principal and emerging risks are discussed further on pages 36 to 42.
The Committee was satisfied that the revised enterprise risk management framework was effectively
implemented and presented to the Board.
The Committee considered the internal controls in place throughout the year as being effective.
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.
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GOVERNANCE
116
Climate-related financial disclosures
Following the Group’s adoption of the TCFD recommendations in the prior year, 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 the year, 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 timeline and process leading up to the publishing of its 2030 decarbonisation strategy;
• the Group’s decarbonisation objectives; and
• assurance, through the Sustainability Committee, on climate-related risk management effectiveness.
Financial disclosure
The Committee continued to ensure that the Group’s Annual Report and Accounts 2022 and the Half-
Year Report 2022 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 146 to 207 for the year ended 31 December 2022 and issued an unmodified audit opinion in
this regard.
The significant issues reviewed by the Committee relating to the 2022 results were:
• The assumptions in the Group’s financial forecasts incorporating 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 page 161 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 the Russian invasion of
Ukraine and the availability of reliable power supply on inflation and costs, production capabilities
and exchange rate fluctuations. The Committee critically reviewed the key assumptions and
parameters (diamond price forecasts and the discount rates applied in assessing the valuations) in the
LoM plan for Letšeng (currently an extended open pit plan including a new Satellite pipe Cut 6W
cutback and steeper slope angles in the Main pit) 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. The impact on the LoM valuation caused by changes to the
underlying operational plan, costs (including cost saving due to the right-sizing project at Letšeng)
and capital expenditure assumptions were noted. 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 ceasing the assessment of Ghaghoo as a discontinued
operation held for sale and reclassifying it into continuing operations. The Committee assessed the
progress of the sales process and the more recent communications with the Botswana Director of
Mines and supported management assumptions on the basis that, although the Company remains
committed to a sale opportunity, the Company is considering other exit options.
• 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 Revenue Services Lesotho
in December 2019, contradicting the application of certain tax treatments in the current Income Tax
Act.
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Future focus areas
Specific focus areas for 2023 are to:
• continue to assess principal and emerging risks and consider the impact of climate change on any of
these risks;
• ensure adequate reporting against the Group’s decarbonisation strategy and set targets;
• continue to assess the quality and effectiveness of the external audit and the procedures and controls
to ensure auditor independence;
• ensure the adequacy of the tender process for the appointment of the new auditor for the 2024 audit
and recommend the chosen firm as decided by the Committee to the Board of Directors for
appointment; and
• ensure continued adequate reporting against relevant sustainability standards such as the TCFD
recommendations and UN SDGs.
2022 value-adding activities Link to strategic
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Extracting Maximum Value
from Our Operations
Working Responsibly and Maintaining
Our Social Licence
Preparing for Our Future
GOVERNANCE
118
REMUNERATION COMMITTEE
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 shareholders.
STRUCTURE
Annual Statement, which includes an “at a glance” of
remuneration decisions Page 119
Directors’ Remuneration Policy Page 122
Annual Report on Remuneration Page 129
Michael Lynch-Bell
Chairperson
Independent non-Executive Director
ANNUAL STATEMENT
Dear Shareholders
On behalf of the Board, I am pleased to present the Remuneration Committee’s Directors’ Remuneration Report for 2022. 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
supports the Group’s purpose to produce the best diamonds, in the best way, leaving a lasting legacy. This purpose is 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 2022
Context
In 2022, the Group emerged from the COVID-19 pandemic to resume more normal operations. However, new challenges
emerged following Russia’s invasion of Ukraine. This impacted global inflation, resulting in extraordinary increases in fuel prices.
In addition, Eskom’s electricity outages posed challenges to normal production activities and negatively impacted costs due to
increased alternative power generation.
Despite these challenges, the Group ended the year with a cash balance of US$8.7 million and drawn down facilities of US$5.4
million, resulting in a net cash position of US$3.3 million. Underlying EBITDA from continuing operations decreased 24% to
US$43.7 million from US$57.4 million in 2021. A cash dividend of 2.7 US cents was paid during the year as approved by the AGM
in June 2022. In addition, the Board launched a share buyback programme to the amount of US$1.2 million, which was another
important mechanism by which to return further capital to shareholders. The Board is not proposing a dividend based on the
2022 financial results due to the volatility in the current economic outlook and the need to preserve the Group’s available cash
resources.
Following the preliminary conceptual study on the potential economic viability and mining method for the underground
expansion of the Satellite pipe at Letšeng in 2021, the Group commenced a detailed Underground Feasibility Study in 2022 with
further geological and hydrogeological drilling and modelling, geotechnical drilling, geo-metallurgy and social and
environmental impact assessments to be undertaken during 2023.
The Group committed to a 30% reduction of its Scope 1 and 2 emissions by 2030, from a 2021 base, as set out in Our Approach to
Climate Change on page 34. This commitment follows the adoption in 2022 of its decarbonisation strategy, which sets out its
ambitions to reduce energy consumption, improve energy use efficiency and transition to renewable energy sources. This
strategy is underpinned by the Group’s carbon-pricing model. It also successfully completed the second year of the three-year
roadmap to adopt the TCFD recommendations. In this context, the Committee’s key decisions during the year related to the
following areas:
Gem Diamonds Incentive Plan (GDIP)
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.
In 2022 the CEO and CFO were awarded respectively 297 217 and 201 141 nil-cost share options under the deferred portion of
the 2021 GDIP as reflected on page 138.
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The resulting formulaic GDIP outcome for the 2022 business scorecard was 32.9% of maximum (which accounted for 85% of the
GDIP); the personal performance outcomes (accounting for 15% of the GDIP) averaged 12% across the Executive Directors. The
Committee concluded that the 2022 GDIP outcome would be 43.9% for the CEO and 45.9% for the CFO, with 55% paid as cash
and 45% deferred in shares as per the Remuneration Policy, and as reflected in the single figure emoluments table on page 134.
The Committee also considered the decline in the share price over 2022, and agreed that the share price to be used to determine
the number of shares to be granted in 2023 under the deferred GDIP award would be 50 GB pence, rather than the prevailing
share price of c.31 GB pence at the meeting when the Committee reviewed the GDIP outcome. This will have the effect of
reducing the number of shares to be granted in 2023 by c.40%, which also implies a lower aggregate bonus for the Executive
Directors than in 2021.
ESOP
The 2020 ESOP award rewards performance against total shareholder return (TSR) versus a tailored diamond mining comparator
group (25% weighting), and profit and production (75%), 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. 17.7% (out of a maximum of 75%) of the profit and production elements will respectively vest, based on
performance over the three-year period. Overall, 42.7% of the share awards granted to the Executive Directors under the 2020
ESOP will vest on 9 June 2023, subject to continued employment at that time.
The specific targets and outturns underlying these elements are discussed in detail on page 138 of the Annual Report on
Remuneration. The Committee considered the guidance issued by shareholders regarding windfall gains at the time of grant and
determined that the approach used to grant ESOP awards at the same number of shares in each cycle protected against windfall
gains at the time, as it avoided granting more shares in the event the share price declined. While the awards are not due to vest
until 9 June 2023, the Committee notes that the three-month average share price to 31 December 2022 of 31.22 GB pence is
lower than the grant price in 2020 of 31.75 GB pence. 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.
Implementation of the Remuneration Policy in 2023
The Executive Directors’ salaries were reviewed in February 2023, considering relevant benchmarks and in-country inflation. The
review was 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% effective 1 April 2023. The Committee believes that this level of increase
is appropriate given the current economic circumstances in which we are operating. The increase is lower than the 7.8% of salary
increase awarded to the wider workforce, which took into account the year on year increase in inflation instead of a forecasted
inflation position (5.8%) as in previous years.
The Committee is also aware of the role it can play in supporting our employees in the current economic environment. We do
this by offering a range of benefits and programmes across the Group to support employees’ health, well-being and work-life
balance.
For 2023, 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 Committee is mindful of the impact our operations have on the environment, and a Working Responsibly and Maintaining
Our Social Licence element has been included in the GDIP since it was first implemented in 2021. For 2023 this will include
reducing our environmental impact, diversity initiatives and various health and safety metrics. The Committee reviews the
metrics on an annual basis and will keep under review the options to broaden our ESG targets to include other ESG metrics,
provided they align with our strategy at the time.
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.
As from 1 January 2023, Executive Director pensions are fully aligned with that of the workforce at 7.5% of salary, following
pension reductions during 2022 of 5.8% and 4.6% of salary respectively for the CEO and CFO. Refer to pages 134 to 141 for
further details on the implementation of the Remuneration Policy in 2023.
Engagement
I look forward to receiving your support at our 2023 AGM. The Board considers it important that shareholders have the
opportunity to raise questions with the Board. Shareholders are invited to send any questions 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
Executive on mzech@gemdiamonds.com.
Michael Lynch-Bell
Chairperson of the Remuneration Committee
15 March 2023
GOVERNANCE
120
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 certain 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
in January 2023.
GDIP
• Participants can receive a maximum of up to 180% of their base salary.
• For threshold-level 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
Wider considerations for employees in 2022
+5.8% approved inflationary increase to comparative
employees’ basic salaries effective from 1 January 2022 (excluding
Directors)
No Malus or Clawback
provisions triggered in 2022
7.5% pension contributions. Executive Director pensions were
aligned to workforce pensions from 1 January 2023 (accelerated
compared to that previously adopted in the 2021 Remuneration
Policy)
Similar group performance scorecards for management
incentive schemes across the Group
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Gem Diamonds Limited Annual Report and Accounts 121
BASIC SALARY AND SHAREHOLDING GDIP
Shareholding Profile of scorecard
200% of salary shareholding requirement
CEO
Total
shareholding
569% of salary
CFO
Total
shareholding
39% of salary
Pension and benefits:
• Pension contributions for the CEO and CFO reduced to 7.5% of salary
effective 1 January 2023
• In 2022 no change was made to allowances for non-cash benefits
Total non-executive director fee
£362 712 actual < £750 000
maximum aggregate per the Articles
15%
55%
20%
10%
Individual (15%)
Group (85%)
Extracting maximum
value from our operations
Working responsibly and
maintaining our social licence
Prepare for our future
REMUNERATION POLICY
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 2023 meeting and concluded that it remains fit for purpose. The
Policy is as disclosed in the 2021 Directors’ Remuneration Report save for some non-significant changes as follows:
• references to financial years have been updated where appropriate;
• references to performance measures have been updated for the latest business strategy, as appropriate; and
• pay-for-performance charts have been updated to reflect 2023 salaries.
The Remuneration Policy is designed to provide a level of remuneration that 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 provide base salaries and benefits that are fair and to weight remuneration towards variable pay.
Variable pay incentives are 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.
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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
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.
Simplicity
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.
Risk
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.
Proportionality
The Committee’s overriding discretion ensures that remuneration outcomes are aligned with
Group performance.
Predictability
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.
Culture
As reflected in the Chairperson’s statement on page 14, 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 high calibre necessary
to execute the Group’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
To provide competitive benefits considering the market value of the role and benefits offered to
the wider UK management population, in line with the Group’s strategy to keep remuneration
simple and consistent.
Operation Executive Directors receive a cash allowance in lieu of non-cash benefits.
Opportunity
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
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Pension
Purpose and link to
strategy
To provide retirement benefits that are appropriately competitive.
Operation Executive Directors receive a cash allowance in lieu of pension.
Opportunity
Any current and/or new Executive Director will receive pension benefits aligned to that of the
wider employee group (currently 7.5% of salary).
Performance measures N/A
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 Group 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.
Senior management (below Board level) remuneration 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.
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Shareholding guidelines
The in-post guideline was increased in February 2022 to require 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 2023
The table and subsequent graph below illustrate 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 2023.
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 Base salary for 2023
Benefits 6.0% of salary
Pension 7.5% of salary
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
CEO (%)
Total (£’000)
604 1 083 1 562 1 562
CFO (%)
Total (£’000)
399 715 1 031 1 031
100
56
38 38
0
24
34 34
0
20
28 28
Fixed remuneration
GDIP (cash)
GDIP (deferred shares)
Minimum On-
target
MaximumMaximum
+50
100
56
38 38
0
24
34 34
0
20
28 28
Fixed remuneration
GDIP (cash)
GDIP (deferred shares)
Minimum On-
target
MaximumMaximum
+50
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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
Rolling contract 12 months
Pay basic salary on summary termination. Benefits
are payable only at the Committee’s discretion.
M Michael 22 April 2013
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.
GOVERNANCE
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Incentive Scenario Time of payment/vesting Calculation 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)
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
Change of control (whether or not
employment is terminated as a
result)
Immediately, on change of control 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 Unvested awards will normally be
pro-rated for time unless the
Committee decides otherwise
All other reasons Not applicable Awards lapse
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
Not applicable
Change of control (whether or not
employment is terminated as a
result)
Immediately, on change of control Not applicable
All other reasons Normal release date, although the
Committee has discretion to
accelerate
Not applicable
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.
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Director Contract date Unexpired term Notice period
Contractual
termination payment
H Kenyon-Slaney 6 June 2017
Rolling appointment Three months
No provision for
payment of
compensation
M Brown 1 January 2018
M Lynch-Bell 15 December 2015
M Maharasoa 1 July 2019
R Kainyah 1 May 2021
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 2021 Annual Report on Remuneration (at
the 2022 AGM) and the 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.
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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 2022, and how the Remuneration Policy will be implemented in 2023. This Annual Report
on Remuneration will be subject to an advisory vote at our 2023 AGM on 7 June 2023.
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.
Michael Lynch-Bell
Chairperson
Independent non-Executive Director
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.
• 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 2022:
• M Lynch-Bell
• H Kenyon-Slaney*
• R Kainyah
Other attendees:
• C Elphick*
• M Michael*
• Group Human Resources Executive
• Ellason (Independent remuneration consultants)
• Secretary (Bruce Wallace Associates)
* Except when issues relating to their own remuneration are discussed.
Remuneration Committee skills (%)
100%
78%
78%
78%
67%
67%
67%
56%
44%
Senior executive
International markets
Core industry
Environmental/Social
M&A/Capital markets
Financial/Audit and Risk
Legal/Regulatory
Health and safety
Technical/Engineering
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2022 value-adding activities Link to strategic
pillar
Remuneration policies and practice
Reviewed the remuneration policy to ensure it is appropriate to motivate and reward senior executives
and align their interests with the Group’s purpose and values, as well as the interest of shareholders.
Reviewed the implementation of in- and post-termination shareholding policies.
Ensured incentives include an appropriate balance of financial and non-financial elements for the long-
term sustainability of the Group.
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.
Share-based remuneration and bonus arrangements
Considered the effectiveness of short and long-term incentive structures and the alignment with
shareholder expectations.
Reviewed the range of non-financial performance metrics in variable remuneration.
Determined performance conditions and targets for incentive plans.
Considered the effectiveness of current ESG metrics linked to executive pay and whether further human
capital management (HCM) topics are material to the business and should be monitored.
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 diversity, equity and inclusion (DE&I) metrics and their link to executive pay.
Pension arrangements
Accelerated alignment of executive pension contributions to that of the wider workforce to 1 January
2023.
Workforce remuneration and related policies
Confirmed that the Group’s compensation programmes consider employees’ needs beyond fair and
equitable remuneration.
Engaged with employees through formalised structures on executive pay and how it supports strategy.
Reviewed employee remuneration and related policies and the alignment of incentives and rewards
with culture and strategy.
Reviewed gender pay data to establish whether pay gaps are present.
Other matters
Reviewed the Committee’s composition, terms of reference and operation.
Reviewed and approved the Directors’ Remuneration Report for 2021.
Future focus areas
In 2023 the Committee will:
• Closely examine all incentive plan metrics and payout ranges to ensure that they adequately align
with the Group’s strategic and operational goals and shareholder interests, and also have an
appropriate level of resilience to withstand future unforeseen events.
• Consider extending the Committee’s remit to include a broader oversight of human capital matters to
establish whether the Group’s compensation programmes address the issues that employees care
about.
Extracting Maximum Value
from Our Operations
Working Responsibly and Maintaining
Our Social Licence
Preparing for Our Future
GOVERNANCE
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Consideration of independence
Ellason LLP was appointed by the Committee in January 2021 to provide independent remuneration advice to the Committee
and attend Committee meetings. Ellason LLP provides remuneration advice to a large portfolio of clients, including many in the
FTSE 350 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 to them in relation to work for the Committee in 2022 were US$22
635, excluding VAT.
Summary of shareholder voting
The table below shows the results of the advisory vote on the 2021 Annual Report on Remuneration at the 2022 AGM and the
binding vote on the 2021 remuneration policy at the 2021 AGM.
For Against Total votes cast Withheld
2021 Report on
Remuneration
Total number of votes 49 271 442 7 491 895 56 763 337 30 457 054
Percentage of votes cast 86.8 % 13.2 % – –
2021 Remuneration
Policy
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. The average awarded to the wider workforce is 7.8% of salary for 2023, which took into account the
year on year increase in inflation instead of a forecasted inflation position (5.8%) as in previous years.
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 also offer a wide range of benefits and
programmes throughout the Group to support employees’ health, well-being and work-life balance. Benefits and programmes
vary from site to site, and include employee wellness and/or access to a counsellor, an employee communications app, on-site
gym and/or recreation centres, travel subsidies, a flexible working environment and paying for professional subscriptions.
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 workforce
committees across the Group. During 2022 the Remuneration Committee Chairperson attended one engagement session per
operational site. This afforded 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 (dividends,
share buybacks and return of capital) from the financial year ended 31 December 2021 to the financial year ended 31 December
2022.
2022 US$ 2021 US$ % change
Distribution to shareholders
1
– 3 770 704 (100) %
Employee remuneration
2
18 964 828 19 347 781 (2) %
Return of capital
3
1 156 783 – 100 %
1
The 2021 figures have been adjusted to reflect the actual distribution on the dividend payment date of 21 June 2022.
2
Includes salary, pension and benefits, bonus, accounting charge for the ESOP, and employer national insurance contribution.
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. The amount for
2022 relates to the amount spent on the share buyback programme.
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Pay for performance
The graph shows the Company’s total shareholder return (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 2022. 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. FTSE 350 Mining Index and 2022 TSR Peers (£))
Gem Diamonds Ltd FTSE 350 Mining Index Median 2022 TSR peers
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
0
25
50
75
100
125
150
175
2013 2014 2015 2016 2017 2018 2019 2020 2021
2022
CEO single
figure of
remuneration
(£)
776 406 892 935 879 719 611 314 681 191 995 161 891 643 989 921 1 016 832 1 032 320
1
Annual bonus
outcome (% of
maximum)
61.0 83.0 74.0 0.0 20.0 83.0 62.6 66.0 39.3 43.9
ESOP vesting
outcome (% of
maximum)
0.0 0.0 0.0 28.3 14.5 21.4 25.9 65.9 60.1 42.7
1
Share options under the deferred portion of the 2022 GDIP will be awarded in 2023 following the release of the 2022 annual results. The Committee applied its discretion in awarding
deferred share options at a price of 50 GB pence rather than the prevailing share price of c.31 GB pence. This will have the effect of reducing the number of shares granted by c.40%,
which also implies a lower aggregate bonus for the Executive Directors than paid in 2021.
GOVERNANCE
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The percentage change in Director remuneration compared to other employee pay
The table below 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 2022. 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.
Executive Directors Non-Executive Directors
Comparator
group
2
C Elphick M Michael
H Kenyon-
Slaney
M Lynch-
Bell M Brown
M
Maharasoa R Kainyah
2022
Base
salaries (%
change)
4.0 4.0 10.0 4.0 4.0 4.0 4.0 4.7
Benefits
(% change)
(1.3) (1.0) – – – – – –
Bonuses
(% change)
1
4.6 5.6 – – – – – 7.3
2021
Base
salaries (%
change)
4.1 4.1 4.1 4.1 4.1 4.1 4.1 5.9
Benefits
(% change)
(0.9) (0.7) – – – – – –
Bonuses
(% change)
(27.1) (27.1) – – – – – (19.9)
2020
Base
salaries (%
change)
(1.3) (1.3) (14.5) (16.0) (16.0) 96.0 – (2.0)
Benefits
(% change)
– – – – – – – 0.7
Bonuses
(% change)
3.7 4.7 – – – – – 4.9
1. The executive bonus depicts the formulaic change in the GDIP outcome for 2022. The Committee’s discretion in awarding deferred share options at a price of 50 GB pence implies
a reduced aggregate bonus with a y-o-y net effect of -3% and -2% respectively for the CEO and CFO.
2. The comparator group is made up of Letšeng Diamond employees which in turn makes up 87% of the Group’s employees.
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.
Salary increases
The Committee approved a 4% salary increases for the Executive Directors in 2022, effective 1 April 2022:
Executive Director 2022 salary 2021 salary % increase
£ £
C Elphick 511 578 491 902 4 %
M Michael 337 620 324 635 4 %
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
2022, the pension allowance for the CEO and CFO was reduced to 12.2% and 11.2% of salary respectively, and was further
reduced to 7.5% as of 1 January 2023 to be fully aligned with pension contributions to the wider employee group. 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.
Presenting the Gem
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Gem Diamonds Limited Annual Report and Accounts 133
Implementation of remuneration policy for 2022
Total single figure of remuneration for directors
The table below sets out the total single figure remuneration received by each Director for 2022 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 fees
1
Non-cash benefits
2
Pension
3
Total fixed
remuneration GDIP (cash)
4
GDIP
(share options)
5
ESOP
6
Total variable
remuneration Total
2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021
£ £ £ £ £ £ £ £ £ £ £ £ £ £ £ £ £
Executive
Directors
C Elphick
506 659 491 902 27 867 27 055 63 166 66 899 597 692 585 856 222 166 191 404 181 772 156 604 30 690 82 968 434 628 430 976
1 032 320
1 016 832
M Michael
334 374 324 635 20 062 19 478 38 180 40 011 392 616 384 124 153 305 129 533 125 431 105 981 22 684 61 324 301 420 296 838 694 036 680 962
Non-Executive
Directors
H Kenyon-
Slaney
131 580 122 400 – – – – 131 580 122 400 – – – – – – – – 131 580 122 400
M Lynch-Bell
57 783 56 100 – – – – 57 783 56 100 – – – – – – – – 57 783 56 100
M Brown
57 783 56 100 – – – – 57 783 56 100 – – – – – – – – 57 783 56 100
M Maharasoa
57 783 56 100 – – – – 57 783 56 100 – – – – – – – – 57 783 56 100
R Kainyah
7
57 783 37 400 – – – – 57 783 37 400 – – – – – – – – 57 783 37 400
Audited
1
Salary and fees.
2
Non-cash benefits : cash payments in lieu.
3
Pension: cash payments in lieu
4
Includes the cash component of the GDIP.
5
The 2022 GDIP (share options) figures relate to the value of the deferred nil-cost share options to be awarded in 2023 following the release of the 2022 annual results. The Committee applied its discretion to award deferred share options at a price of 50 GB pence rather than
the prevailing share price of c.31 GB pence. This will have the effect of reducing the number of shares granted by c.40%, and also implies a lower aggregate bonus for the Executive Directors than paid for in 2021.
6
The 2022 ESOP figures relate to the values at vesting of awards vesting on performance over the three-year period ended 31 December 2022. 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 2022 of 31.22 GB pence. The 2022 values at vesting reflect the impact of a 2% reduction in share price over the period. The 2021 figures have been adjusted to reflect the share price on the vesting date of 60.00 GB pence.
7.
R Kainyah was appointed to the Board in May 2021. The 2021 fees relate to the period 1 May 2021 to 31 December 2021.
GOVERNANCE
134
GDIP in respect of 2022 performance
Executive Directors participated in the GDIP in 2022, 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 2022, 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%), with 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 results for 2022 are disclosed in full in the table below.
Weighting
(% of max)
Threshold
target
Stretch
target
Actual
performance
Pay-out
% of max
Preparing for Our Future
As set out in strategic focus areas 10.0 Judged by Committee on discretionary basis 6.5
Extracting Maximum Value
Underlying EBITDA (US$ millions) 30.0 52.3 70.8 43.7 –
Costs
» Corporate costs (US$ millions) 1.5 8.1 7.3 7.3 1.5
» Cost per tonne (LSL) 13.5 335 303 405 –
Carats recovered (carats) 10.0 95 335 116 521 106 704 5.4
Working Responsibly, Maintaining Social
Licence
Reduce environmental impact 5.0 Judged by Committee on discretionary basis 5.0
All Injury Frequency Rate (AIFR) 5.0 2.0 1.0 0.7 5.0
Any fatality will result in 100% forfeiture of
this element 5.0 – – – 5.0
Implement focused diversity initiatives 2.5 Judged by Committee on discretionary basis 2.0
Any major community incident will result in
100% forfeiture of this element 2.5 – – – 2.5
85.0 32.9
Preparing for Our Future
• Long-term mine planning and optimisation
Underground: The desktop mining study for the potential Satellite underground mine was completed in November 2021. The
outcome indicated potential for an underground mine and recommended a comprehensive Underground Feasibility Study to
confirm the extension of the life of mine for the Satellite pipe. This study will assess the viability of an earlier shift to underground
mining of the Satellite pipe and to evaluate the trade-off between this and proceeding with Cut 6 West (C6W). This study, which
commenced in July 2022, will include several underground feasibility studies, such as geological drilling and modelling,
geotechnical drilling, geo-metallurgy and social and environmental impact assessments. Refer to the Operations Review on page
56 for more information.
Steeper slopes: Following the successful execution of the steeper slope initiative in the Satellite pipe, steeper slopes were also
executed in the Main pipe in 2022. This has created significant long-term value in reduced waste tonnes to be mined and
reduced hauling distances of waste from the Main pipe, resulting in a decrease in operating costs and carbon emissions.
Power usage: A workstream to assess power usage and reduced consumption in the short and long term has commenced. A
current study will also consider alternative energy sources to ensure the availability of power for continued operations, including
the additional power required for the underground project. In the interim, initiatives to reduce power consumption on site (in
particular in the accommodation and office blocks) are being investigated to mitigate the constraints on available power
resources and increasing cost of diesel-generated power at the mine.
Resource extension: The resource extension drilling programme was completed in 2022. The results of this drilling programme
informed the updated 3D Resource Models (of the Satellite and Main pipes) which will be used for the Resource and Reserve
Statement and long-term mine planning and optimisation (including the Underground Feasibility Study).
• Assessment of external growth opportunities
During 2022 various parties were engaged pertaining to possible corporate activities.
• Advance innovative technologies focusing on reducing diamond damage and reducing costs
Surface miner: In 2022, Gem Diamonds embarked on a project to optimise ore fragmentation and plant throughput by trialling a
surface miner in Main Pit Cut 4 East. From the trial done at Letšeng, the technology presents a potentially diamond-friendly
method of breaking the rock while providing consistently well-fragmented ore to the plant, positively impacting throughput. In
addition to achieving higher truck payloads, the surface miner is able to establish steeper pit slopes in ore and enable access to
Presenting the Gem
Diamonds Annual Report
and Accounts 2022
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review Governance
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Gem Diamonds Limited Annual Report and Accounts 135
more ore for the same waste stripped. Avoiding the drilling and blasting process is a cleaner mining method as no nitrates are
released into water around the mine. The incorporation of a surface miner into Letšeng’s mining method for the Satellite pipe is
being considered and discussions with various surface miner suppliers and mining contractors have commenced.
EnKap: Work continues on EnKap and other solutions to detect diamonds fully encapsulated in kimberlite rock.
The Committee reviewed the performance in this area during 2022 on a holistic basis, and determined that a score of 6.5 out of
10 was appropriate.
Reduce environmental impact
• Develop the Group’s decarbonisation strategy
The Group decarbonisation strategy was announced in March 2023. Refer to page 28 for more information.
• Improve fossil fuel-based energy efficiencies
In 2022 Gem Diamonds consumed 7.4GJ of energy per carat recovered (2021: 10.0GJ). Various initiatives as set out on page 74
were implemented to achieve these efficiencies.
• Enhance water use efficiencies and treatment capabilities
In 2022 Gem Diamonds used 30.9m
3
water per carat recovered (2021: 61.6m
3
). Various initiatives as set out on page 70 were
implemented to achieve these efficiencies.
The Committee reviewed the performance in this area during 2022 on a holistic basis, and determined that a score of 5 out of 5
was appropriate.
Implement focused diversity initiatives
The Group’s diversity strategy focuses on three areas, namely initial recruitment, medium-term retention and promotion.
Implementation of initiatives to drive diversity within the Group follows a phased approach and during 2022 mainly focused on
the following aspects:
• Vacancy advertisements were updated to include the relevant Company’s commitment to diversity.
• Interviewers have been scheduled to receive unconscious bias training in 2023.
• Interview panels include a “bias challenger” which is typically a female manager.
• The Letšeng sponsorship programme includes additional points on the scoring system for females. Four out of seven
scholarships were awarded to females for 2023.
• Education of scholars on the opportunities in mining is scheduled for 2023.
• Maternity benefits are being revisited.
• A Future managers programme has been implemented to provide for rotational programmes across business units as part of
development plans.
Across the Group, gender diversity for own employees (excluding contractor employees) increased by 3%.
The Committee reviewed the performance in this area during 2022 on a holistic basis, and determined that a score of 2 out of 2.5
was appropriate.
GOVERNANCE
136
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 11% and 13% (out of
15%) respectively for the CEO and CFO.
Clifford Elphick
Strategic focus area Performance
Preparing for Our
Future
• During the year, numerous assets and projects were reviewed and a number of parties were
engaged as part of the strategic focus on growth and expansion.
Extracting Maximum
Value from Our
Operations
• The Dubai trial tender viewings continue, 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 firm prices achieved.
• An agreement was entered into with two important diamond manufacturing clients who will supply
polished diamonds to some of world’s most premium luxury jewellery brands. These diamonds are
polished to the clients’ specifications and additional value is realised for the Group as it shares in a
percentage of the polished sales price of these diamonds.
Working Responsibly
and Maintaining Our
Social Licence
• Succession planning across the Group was progressed with an increased focus on diversity and
inclusion. This specifically led to the appointments of Kiki Constantopoulos and Minelle Zech to the
Executive Committee. Training spend on the development of female employees was significantly
higher than in prior years.
• During the year the Group adopted a decarbonisation strategy and carbon-pricing model, and
committed to a 30% reduction in its Scope 1 and 2 emissions by 2030.
• An employee communication app named LetšGem was implemented in November 2022, providing
an informal and immediate communication channel with the entire workforce.
Michael Michael
Strategic focus area Performance
Preparing for Our
Future
• A comprehensive Underground Feasibility Study commenced to provide details of the financial
viability and method of mining for the underground expansion of the Satellite pipe.
• Surface miner trials continued at Letšeng. The technology presents a potentially diamond-friendly
method of breaking the rock while providing better fragmented material for feeding to the plants
and thereby increasing plant throughput.
Extracting Maximum
Value from Our
Operations
• A number of initiatives were implemented to reduce energy consumption, carbon emissions and
operating costs. These initiatives include steeper slopes in the Main pit resulting in reduced haulage
distances and fuel consumption, and an energy prioritisation programme that determines which
operational elements can run on generator power when grid electricity is unavailable.
Working Responsibly
and Maintaining Our
Social Licence
• The Group successfully implemented the second phase of our TCFD adoption journey. This included
the adoption of a decarbonisation strategy and a carbon-pricing model, augmenting our climate-
related Board and management structures and implementing initiatives to improve resource use
efficiencies.
The formulaic outcome from the business scorecard for Group performance was 32.9% (out of the maximum 85%) which,
combined with the personal element, resulted in formulaic GDIP outcomes of 43.9% and 45.9% of maximum for the CEO and the
CFO, respectively. The Committee considered the decline in the share price over 2022, and agreed that the share price to be used
to determine the number of shares to be granted in 2023 under the deferred GDIP award would be 50 GB pence, rather than the
prevailing share price of c.31 GB pence at the meeting when the Committee reviewed the GDIP outcome. This will have the effect
of reducing the number of shares to be granted by c.40%, which also implies a lower aggregate bonus for the Executive Directors
than paid for FY 2021.
Presenting the Gem
Diamonds Annual Report
and Accounts 2022
Strategic
report
Performance
review Governance
Directors’
report
Financial
statements
Report on
payments to
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Additional
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Gem Diamonds Limited Annual Report and Accounts 137
Based on business and personal performance, the GDIP incentive for 2022 was as follows:
Total
Performance
score (%) Cash
Deferred
shares
(value)
1
Total
Executive Directors at 31 December 2022
C Elphick 43.9 222 166 181 772 403 938
M Michael 45.9 153 305 125 431 278 736
1
The deferred nil-cost options will be granted in 2023 at a share price of 50p and will be subject to the rules as set out in the Directors’ Remuneration Policy on page 122.
ESOP: 2020 awards vesting in 2023
The Executive Directors were granted awards of performance shares in June 2020, which are set out in the table below:
Date of grant
Number
options
granted
Share price
on date of
award
Face value
on date of
award
Face value
as % of
salary Vesting date£ £
Executive Directors at 31
December 2022
C Elphick 9 June 2020 230 000 0.318 73 025 15 9 June 2023
M Michael 9 June 2020 170 000 0.318 53 975 17 9 June 2023
Vesting of the awards was dependent on relative TSR against companies in the diamond mining sector (25% of the award)
measured over the period 1 January 2020 to 31 December 2022. Profit and production (75%) 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.
Performance
measure
Weighting
(% of max)
Performance
period
Threshold
(20%
vesting)
Stretch (80%
vesting)
Super
stretch
(100%
vesting)
Actual
performance
Vesting
outcome (%
of max)
TSR versus
diamond mining
peer group
25.00 3 years Median
75th
percentile
85th
percentile
Top of group 25.0
Underlying
EBITDA (US$
million)
18.75
2020 46.5 69.8 76.7 53.2 7.1
2021 60.9 91.4 100.6 57.4 0.0
2022 54.2 81.3 89.4 43.7 0.0
Average 2.3
EPS (US cents)
18.75
2020 8.7 13.0 14.3 9.8 5.9
2021 15.2 22.7 25.0 10.5 0.0
2022 17.7 26.5 29.1 7.3 0.0
Average 2.0
US$ per carat
18.75
2020 1 490 2 015 2 217
1908
12.7
2021 1 396 1 888 2 077 1 835 13.8
2022 1 514 2 048 2 253 1 755 8.8
Average 11.8
Carats recovered
18.75
2020 114 890 134 039 146 804 100 780 0.0
2021 122 400 142 800 156 400 115 335 0.0
2022 104 870 122 348 134 000 106 704 4.9
Average 1.6
100 42.7
Audited
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 2022, 42.7% of the maximum award will vest for Clifford Elphick and Michael Michael in
June 2023, subject to their continued employment at the time.
GOVERNANCE
138
Awards granted in 2022
The CEO and the CFO received share options with face values of 31% of their then salaries, as summarised in the table below.
Executive
Director
Date of grant
Number of options
granted
Share price to
determine award
1
Face value of award
Face value as % of
salary
£ £
C Elphick 4 April 2022 297 217 0.5269 156 604 31 %
M Michael 4 April 2022 201 141 0.5269 105 981 31 %
1. The number of deferred share options awarded was determined based on the 3-month average share price to 31 December 2021. The share price on the date of award was 58p.
Details of outstanding awards of performance options to Director
Performance
options as at
1 January
2022
1
Granted
in the
year
Vested
in the
year
Lapsed
in the
year
Exercise
price
Date of grant
Earliest
normal
exercise date Expiry date
Performance
shares
outstanding
as at 31
December
2022£
M Michael 37 088
2
– – – 177.6
11
September
2012
1 January
2016
31 December
2023 37 088
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 2022 was
31.22 GB pence. The highest and lowest closing prices in the year were 72.9 GB pence and 28.6 GB 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.
2
These awards were granted to M Michael before he became a Director.
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 2022 are presented below.
It is confirmed that there were no changes to the Directors’ holdings between 31 December 2022 and the date of this report. 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
2022
Subject to
performance
conditions
Unvested
and subject
to continued
employment
only
Vested
but not
exercised
Subject to
performance
conditions
Vested
but not
exercised
Total
shareholding
as a % of
salary
Shareholding
guideline
met
Executive
Directors
C Elphick
1
9 325 000 – 395 519 – – – 569 % Yes
M Michael 171 849 – 273 799 214 249 – 37 088 39 % No
2
Non-Executive
Directors
H Kenyon-Slaney 50 000 – – – – – – –
M Brown 67 124 – – – – – – –
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.
Presenting the Gem
Diamonds Annual Report
and Accounts 2022
Strategic
report
Performance
review Governance
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Gem Diamonds Limited Annual Report and Accounts 139
Implementation of remuneration policy for 2023
The Committee determined that base salaries will be increased by 4% effective from 1 April 2023. The increase is lower than the
7.8% of salary increase awarded to the wider workforce. The Committee believes that this level of increase is appropriate given
the current economic circumstances in which we are operating:
Executive Director
2023 salary 2022 salary
% increase£ £
C Elphick
532 041 511 578 4 %
M Michael
351 125 337 620 4 %
Pension and benefits
The Executive Directors will continue to receive cash supplements in lieu of pension and benefits in 2023. Effective 1 January
2023, pension benefits reduced to 7.5% of basic salary to align with that of the wider employee group. Pension contributions to
any new Executive Director appointments will be capped at the prevailing wider employee group pension rate at the time.
The allowance in lieu of non-cash benefits will be 6% for both the CEO and CFO. The 0.5% of salary adjustment for the CEO is to
align his benefit allowance with that of the CFO.
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 21 of
this Annual Report and Accounts 2022, 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 2023 are summarised in the table below.
Personal performance 15%
Group performance 85%
Preparing for Our Future 10%
As set out in strategic focus areas 10%
Extracting Maximum Value 55%
Underlying EBITDA (US$) 30%
Costs 15%
Carats recovered (carats) 10%
Working Responsibly, Maintaining Social Licence 20%
This element of the bonus captures several key metrics around the Group’s environmental, safety and social performance.
Consistent with the other measures for the GDIP scorecard, the exact measures and targets will be disclosed in full in the 2023
remuneration report.
Targets are considered sensitive and will be disclosed in full on a retrospective basis in next year’s report. In approving these
targets, the Committee considered a range of perspectives on performance outcomes, including internal and external reference
points. More detail is given on the selection of GDIP performance measures on page 124 of this report.
Dilution
Employee share awards may be satisfied with newly issued
shares subject to aggregate dilution limits. The issue of shares
to satisfy awards under the Company’s share schemes will not
exceed 10% of the Company’s issued ordinary share capital in
any rolling 10-year period. As of 31 December 2022, a total of
14 092 376 shares (10% of issued share capital) may be issued
pursuant to all current awards outstanding over the last 10
years.
As at 31 December 2022, the Company’s headroom position,
which remains within the current IA Guidelines, was as
presented in the chart to the right:
Dilution
headroom
6.53
3.47
Headroom
Outstanding options
GOVERNANCE
140
DETAILS OF OUTSTANDING AWARDS OF PERFORMANCE SHARES TO DIRECTORS
Directors Date of grant
Performance
shares
1
as at
1 January
2022
Granted in
the year
Vested in
the year
Lapsed in
the year
Exercised
in
the year
Exercise
price
US$
Earliest normal
exercise date Expiry date
Performance
shares
outstanding
as at
31 December
2022
C Elphick (CEO) 20 March 2019 230 000 – 138 280 91 720 138 280 – 44 640 47 197 –
9 June 2020 230 000 – – – – – 45 086 47 643 230 000
No award in 2021 – – – – – – – – –
4 April 2022 – 297 217 – – – –
4 April 2023 (1/3)
4 April 2024 (1/3)
4 April 2025 (1/3)
4 April 2032
297 217
Total 460 000 297 217 138 280 91 720 138 280 527 217
M Michael (CFO) 20 March 2018 112 042 – – – – – 20 March 2021 20 March 2028 112 042
20 March 2019 170 000 – 102 207 67 793 – – 20 March 2022 20 March 2029 102 207
9 June 2020 170 000 – – – – – 9 June 2023 9 June 2030 170 000
No award in 2021 – – – – – – – – –
4 April 2022 – 201 141 – – – –
4 April 2023 (1/3)
4 April 2024 (1/3)
4 April 2025 (1/3)
4 April 2032 201 141
Total 452 042 201 141 102 207 67 793 – 585 390
Audited
1
Conditional right to acquire shares.
Chairperson and non-Executive Director fees
Chairperson and non-Executive Director fees were reviewed in February 2023. Considering appropriate industry benchmarks, it was decided that fees for the Chairperson and the non-Executive
Directors will not be increased for 2023.
Presenting the Gem
Diamonds Annual Report
and Accounts 2022
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report
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Gem Diamonds Limited Annual Report and Accounts 141
DIRECTORS’ REPORT
The Directors are pleased to submit the financial statements of the Group for the year ended 31 December 2022.
As a British Virgin Islands-registered company, Gem Diamonds Limited (company registration number: 669758) is not required to
conform with the Companies Act, 2006. However, the Directors have elected to conform to the requirements of the Companies
Act, 2006.
Accordingly, Directors must present a Strategic Report and a Directors’ Report to inform shareholders of the Group’s
performance and prospects and help them evaluate whether the Directors performed their fiduciary duty. The 2022 Annual
Report and Accounts discloses how the Directors have performed their duty to ensure the Group’s continued success and
sustainability, in line with the Companies Act, 2006.
Aligned 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 2022 Annual Report and Accounts, indicated by a reference.
The Strategic Report can be found on pages 3 to 88. This will provide the shareholders with a balanced assessment of the Group’s
business including a description of its principal risks and uncertainties. It may not be relied upon by anyone, including the
Company’s shareholders, for any other purpose.
Forward-looking statements
The Strategic Report and other sections of this report contain forward-looking statements. Forward-looking statements, by their
nature, involve several risks, uncertainties and future assumptions because they relate to events and/or depend on
circumstances that may or may not occur in the future. The actual results and outcomes may differ materially from those
expressed or implied by the forward-looking statements. No assurance can be given that the forward-looking statements in the
Strategic Report will be realised. Statements about the Directors’ expectations, beliefs, hopes, plans, intentions and strategies are
subject to change and are based on expectations and assumptions about future events, circumstances and other factors which
are, in many instances, outside the Company’s control.
The information in the Strategic Report was prepared based on the knowledge and information available to the Directors at the
time of its preparation. The Company is under no obligation to update or revise the Strategic Report during 2023. The
expectations set out in the forward-looking statements are reasonable but may be influenced by a several variables which could
cause actual results or trends to differ materially. Forward-looking statements need to be read in context with actual historic
information provided. The Company’s shareholders are cautioned not to place undue reliance on the forward-looking
statements. Shareholders should note that the Strategic Report has not been audited.
CORPORATE GOVERNANCE
DTR 7.2 requires certain information 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 3 to 88.
DIRECTORS
The Directors, as at the date of this report, are listed on pages 214 to 216 together with their biographical details. Details of the
Directors’ interests in shares and share options of the Company can be found on page 139.
Directors who held office during the year and date of appointment
Appointment
Executive Directors
C Elphick
20 January 2006
M Michael
22 April 2013
Non-Executive Directors
H Kenyon-Slaney
6 June 2017
M Brown
1 January 2018
M Lynch-Bell
15 December 2015
M Maharasoa
1 July 2019
R Kainyah
1 May 2021
DIRECTORS’ REPORT
142
Appointment and re-election of Directors
The Board’s formal Selection and Appointment Policy ensures that the procedure for appointing new Directors is formal, rigorous
and transparent, and appointments are made on merit, against objective criteria. The Nominations Committee makes
appointments based on merit while considering diversity (of gender, social and ethnic background), cognitive and personal
strengths and the specialist skill sets.
The Articles of Association (82) provide that a third of Directors retire annually by rotation and, if eligible, offer themselves for re-
election. However, in accordance with the Code, all the Directors retire at the AGM and, subject to being eligible, offer
themselves for re-election.
Payments for loss of office due to change of control
Details of payments for loss of office to Executive Directors due to a change in control can be found on page 126.
PROTECTION AVAILABLE TO DIRECTORS
By law the Directors are ultimately responsible for most aspects of the Group’s business dealings. This means they face
potentially significant personal liability under criminal or civil law, or the UK Listing, Prospectus and Disclosure and Transparency
Rules and face a range of penalties including private or public censure, fines and/or imprisonment. In line with normal market
practice, the Group understands that it is in its best interests to protect its Board members from the consequences of innocent
error or omission. This allows the Group to attract prudent individuals to act as Directors.
The Group maintains, at its expense, a Director and Officer’s liability insurance policy to provide indemnity, in certain
circumstances, for the benefit of Directors and other Group employees.
Refer to the Corporate Governance statement on page 98 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 139.
SUPPLIERS AND CUSTOMERS
We engage extensively with suppliers and contractors to ensure alignment, mutual understanding and the sustainability of all
parties.
We have ongoing communication with customers and our sales processes have resumed as normal post COVID-19. We achieved
market-related prices for our diamonds throughout the year. In 2022, we entered into an agreement with two important
diamond manufacturing clients who will supply polished diamonds to some of world’s most premium luxury brands. These
diamonds are polished to the specifications of these luxury brands and additional value is realised for the Group as it shares in a
percentage of the sales price of the resultant polished diamonds.
Refer to our stakeholder relationships section on pages 17 to 20 for more details on our engagement with suppliers, contractors
and customers.
RESULTS, DIVIDENDS AND SHARE BUYBACK PROGRAMME
The Group’s attributable profit after taxation amounted to US$10.2 million (2021: US$14.8 million).
The Group’s detailed financial results are set out in the financial statements on pages 145 to 207.
In line with the Group’s commitment to deliver sustainable shareholder returns, the Board proposed a final dividend of 2.7 US
cents per share (US$3.8 million) for the 2021 financial year, which was approved at the Annual General Meeting on 8 June 2022.
In addition, the Board launched a share buyback programme on 12 April 2022 and purchased 1 520 170 shares that are held as
treasury shares. The weighted average purchase price was 60.05 GB pence (78.07 US cents) per share. An amount of US$1.2
million was spent up to 7 June 2022, which is the date that the Board authority lapsed. At the AGM on 8 June 2022 shareholders
again authorised Gem Diamonds to purchase its own shares within the permitted parameters.
The Board is not proposing a dividend based on the 2022 financial results due to the volatility in the current economic outlook,
the Group’s available cash resources and the current business outlook.
The Group’s dividend policy sets the appropriate dividend each year, and considers:
• The Group’s cash resources.
• The level of free cash flow and earnings generated during the year.
• Expected funding commitments for future capital projects.
The Board will consider special dividends in the event of significant diamond recoveries and will consider share buyback
programmes if appropriate.
Presenting the Gem
Diamonds Annual Report
and Accounts 2022
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Gem Diamonds Limited Annual Report and Accounts 143
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 3 to 88. The financial position of the Group, its cash flows and liquidity position are
described in the Strategic Report on pages 49 to 55. 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 UK Corporate Governance Code 2018, is included in the Strategic Report on page 43.
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 15 March 2023, there were 139.4 million fully paid ordinary shares of US$0.01 each in issue and listed on the official list
maintained by the Financial Conduct Authority in its capacity as the UK Listing Authority. In addition, the Company holds 1.5
million shares as treasury shares acquired during the share buyback programme that was launched in 2022. These treasury
shares are not entitled to dividends and have no voting rights.
The Company has one class of ordinary shares. Shareholders have the right to receive notice of and attend, speak and vote at any
general meeting of the Company. Shareholders may be present in person (or, being a corporation, by representative), or by
proxy at a general meeting. Every shareholder present in person (or, being a corporation, by representative) or by proxy will have
one vote in respect of every ordinary share they hold. The appointment of a proxy to vote at a general meeting must be received
no less than 48 hours before the meeting’s appointed time.
Shareholders have the right to participate in dividends and other distributions according to their respective rights and interests
in the profit of the Company.
No shareholders have any special rights with regard to the control of the Company. The Company is not aware of any
agreements between shareholders which may result in restrictions on transfers or voting rights, save as mentioned below.
There are no restrictions on the transfer of ordinary shares other than:
• As set out in the Company’s Articles of Association.
• Certain restrictions may from time to time be imposed by laws and regulations.
• Pursuant to the Company’s share dealing code whereby the Directors and employees of the Company require approval to deal
in the Company’s ordinary shares.
At the AGM held in June 2022, the Board noted the proportion of the votes cast against the resolution referring to the authority
of Directors to allot shares (Resolution 13 passed with 58.55% of participating shareholders voting in favour). The Board was
disappointed in this outcome, given that the resolution reflects UK-listed company market practice. In view of a significant
shareholder’s position and standing policy on this matter, the Board and the executive management team have not engaged in
further consultation with the significant shareholder, but will continue to regularly consider their approach to this matter.
At the same AGM, shareholders authorised the Company to make on-market purchases of up to 13 922 781 of its ordinary shares,
representing approximately 10% of the Company's issued share capital at that time. In 2022, the Company purchased 1 520 170
of its ordinary shares which are being held as treasury shares and may be used to settle ESOP and GDIP awards.
At the 2023 AGM, shareholders will be requested to renew this authority. The Directors continue to consider various options and
keep the authorisation under regular review. The 2023 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.
ARTICLES OF ASSOCIATION
Any proposed amendments to the Articles of Association of the Company need to be approved by shareholders by special
resolution.
DIRECTORS’ REPORT
144
RESOURCE DEVELOPMENT
The Group’s resource development activities are focused on deepening the understanding of existing resources at Letšeng and
collecting information on the future strategic decisions to be made. The Operations Review on page 56 provides more detail on
these activities.
CORPORATE SOCIAL RESPONSIBILITY AND SUSTAINABILITY
Read more about the Group’s 2022 Sustainability Performance, including CSI investment, community participation and
environmental management, in Our Sustainability Report which is available at www.gemdiamonds.com.
POLITICAL DONATIONS
The Group made no political donations during 2022.
TCFD, CARBON EMISSIONS AND ENERGY CONSUMPTION SUMMARY
Information on the Group’s decarbonisation strategy, adoption of the TCFD recommendations, carbon footprint and energy
consumption in 2022 can be found in the Our Approach to Climate Change and Sustainability sections on pages 25 and 64
respectively.
By order of the Board
Harry Kenyon-Slaney
Non-Executive Chairperson
15 March 2023
Presenting the Gem
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Gem Diamonds Limited Annual Report and Accounts 145
RESPONSIBILITY STATEMENT OF
THE DIRECTORS IN RESPECT OF
THE ANNUAL REPORT AND
FINANCIAL STATEMENTS
The Directors are responsible for preparing the Annual Report and the Group financial statements in accordance with
International Financial Reporting Standards (IFRS). Having taken advice from the Audit Committee, the Board considers that this
report and financial statements taken as a whole, are fair, balanced and understandable and that they provide the information
necessary for shareholders to assess the Group’s performance, business model and strategy.
The Strategic Report and Directors’ Report include a fair review of the development and performance of the business and the
position of the Group and the undertakings included in the consolidation taken as a whole, together with a description of the
principal risks and uncertainties that the Group faces.
PREPARATION OF THE FINANCIAL STATEMENTS
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.
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
15 March 2023
Gem Diamonds Limited Annual Report and Accounts 147
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 151 to 207, which comprise the consolidated statement of financial position as at 31 December 2022, 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 2022, and of its consolidated financial performance and consolidated cash
flows for the year then ended in accordance with International Financial Reporting Standards.
Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those
standards are further described in the Auditor’s Responsibilities for the Audit of the consolidated financial statements section of our
report. We are independent of the Group in accordance with the Independent Regulatory Board for Auditors’ Code of Professional
Conduct for Registered Auditors (IRBA Code) and other independence requirements applicable to performing audits of financial
statements of the Group and in South Africa. We have fulfilled our other ethical responsibilities in accordance with the IRBA Code
and in accordance with other ethical requirements applicable to performing audits of the Group and in South Africa. The IRBA
Code is consistent with the corresponding sections of the International Ethics Standards Board for Accountants’ International Code
of Ethics for Professional Accountants (including International Independence Standards). We believe that the audit evidence we
have obtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in 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.
148
Key Audit Matter How the matter was addressed in the audit
GOODWILL IMPAIRMENT
Management performs an annual impairment test on goodwill
as required by IAS 36 Impairment of Assets using discounted
future cash flows to determine the recoverable amount.
Goodwill relates to the Group’s investment in the Letšeng
Diamond mine. The carrying value of goodwill amounts to
US$11.2 million (2021:US$12.0 million).
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 recoverable amount for
each cash generating unit, on the basis of the following key
assumptions:
• Diamond prices;
• Inflation rates;
• Production costs and volumes; and
• Discount rates
The current year impairment model further include certain
assumptions that materially impact the recoverable amount –
these include: next open pit cutback in Satellite pipe (C6W),
optimisation and right-sizing cost savings and steeper slope
angles.
Given the above factors, the goodwill impairment, required
significant audit effort including the use of our valuation experts
in the audit of the recoverable amount.
Our audit procedures included amongst others the following:
• 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;
• Our valuation specialists evaluated the valuation
methodology against acceptable industry methods and
accounting standards;
• 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 assessed the reasonability of the
significant inputs and assumptions used in the impairment
models, such as diamond prices, inflation rates, by comparing
them to independent sources. Assumptions such as
production costs and volumes were considered for
reasonability with reference to history and the mine plan;
• 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 (difference
between the carrying value of the CGU and the recoverable
amount). These included:
▪ WACC; and
▪ Diamond prices
• We considered the appropriateness of the inclusion of next
open pit cutback in Satellite pipe (C6W), optimisation and
right-sizing cost savings and steeper slope angles in the
recoverable amount.
• We assessed the adequacy of the Group’s disclosures in terms
of IAS 36, in the notes to the consolidated financial
statements.
Other Information
Management is responsible for the other information. The other information comprises the information included in the 219-page
document titled ‘Gem Diamonds Annual Report and Accounts 2022’’. 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.
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.
Responsibilities of Management for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with
IFRSs, and for such 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.
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.
Presenting the Gem
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Gem Diamonds Limited Annual Report and Accounts 149
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)
15 March 2023
102 Rivonia Road, Sandton, Private Bag X14, Sandton, 2146
INDEPENDENT AUDITOR’S REPORT
150
CONSOLIDATED STATEMENT OF
PROFIT OR LOSS
FOR THE YEAR ENDED 31 DECEMBER 2022
Notes 2022 2021*
US$’000 US$’000
Revenue from contracts with customers
2 188 937 201 859
Cost of sales (124 113 ) (121 587 )
Gross profit
Other operating expense 3 (1 937 ) (4 116 )
Royalties and selling costs (20 328 ) (21 918 )
Corporate expenses (8 997 ) (8 886 )
Share-based payments 27 (253 ) (397 )
Foreign exchange gain 4 1 914 1 923
Impairment of non-current assets 15 (702 ) –
Operating profit
4 34 521 46 878
Net finance costs
5 (4 089 ) (3 963 )
– Finance income 413 202
– Finance costs (4 502 ) (4 165 )
Profit before tax for the year
Income tax expense 6 (10 277 ) (15 562 )
Profit for the year
Attributable to:
Equity holders of parent 10 178 14 767
Non-controlling interests 9 977 12 586
Earnings per share (cents) 7
– Basic earnings for the year attributable to ordinary equity holders of the parent 7.3 10.5
– Diluted earnings for the year attributable to ordinary equity holders of the parent 7.2 10.4
*The prior year figures have been re-presented, as Gem Diamonds Botswana (Proprietary) Limited (Ghaghoo Diamond Mine) ceased to be classified as a discontinued operation during
the current financial reporting period. Refer Note 15, Assets held for sale.
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Gem Diamonds Limited Annual Report and Accounts 151
CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2022
2022 2021
US$’000 US$’000
PROFIT FOR THE YEAR
Items that could be reclassified to profit or loss in the future:
Exchange differences on translation of foreign operations, net of tax
(18 534 ) (21 196 )
Other comprehensive loss for the year, net of tax
(18 534 ) (21 196 )
Total comprehensive income for the year 1 621 6 157
Attributable to:
Equity holders of parent (2 513 ) (154 )
Non-controlling interests 4 134 6 311
152
CONSOLIDATED STATEMENT OF
FINANCIAL POSITION
AS AT 31 DECEMBER 2022
2022 2021
Notes US$’000 US$’000
ASSETS
Non-current assets
Property, plant and equipment
8
Right-of-use assets
9
Intangible assets
10 11 221 11 962
Receivables and other assets
12
Deferred tax assets
22
Current assets
Inventories
13
Receivables and other assets
12
Income tax receivable
20
Cash and short-term deposits
14
Assets held for sale 15 – 2 097
Total assets
EQUITY AND LIABILITIES
Equity attributable to equity holders of the parent
Issued capital
16
Treasury shares
16
(1 157 ) –
Share premium 885 648 885 648
Other reserves
16
(239 169 ) (226 697 )
Accumulated losses (494 113 ) (500 550 )
Non-controlling interests
Total equity
Non-current liabilities
Interest-bearing loans and borrowings
17
Lease liabilities
18
Trade and other payables
19
Provisions
21
Deferred tax liabilities
22
Current liabilities
Interest-bearing loans and borrowings
17
Lease liabilities
18
Trade and other payables
19
Income tax payable
20
Liabilities directly associated with the assets held for sale
15
Total liabilities
Total equity and liabilities
Approved by the Board of Directors on 15 March 2023 and signed on its behalf by:
C Elphick M Michael
Director Director
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Gem Diamonds Limited Annual Report and Accounts 153
CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2022
Attributable to the equity holders of the parent
Issued
capital
Share
premium
Treasury
shares
Other
reserves
1
Accumul
ated
(losses)/
retained
earnings
Total Non-
controlling
interests
Total
equity
US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000
As at 1 January 2022
Total comprehensive (loss)/
income
– – – (12 691 ) 10 178 (2 513 ) 4 134 1 621
Profit for the year – – – – 10 178 10 178 9 977 20 155
Other comprehensive loss – – – (12 691 ) – (12 691 ) (5 843 ) (18 534 )
Share capital issued (Note16) 4 – – (4 ) – – – –
Share-based payments (Note 27) – – – 253 – 253 – 253
Share buyback (Note 16) – – (1 157 ) – – (1 157 ) – (1 157 )
Transfer between reserves – – – (30 ) 30 – – –
Dividends declared (Note 29) – – – – (3 771 ) (3 771 ) (10 549 ) (14 320 )
As at 31 December 2022
As at 1 January 2021
Total comprehensive (loss)/
income
– – – (14 921 ) 14 767 (154 ) 6 311 6 157
Profit for the year – – – – 14 767 14 767 12 586 27 353
Other comprehensive loss – – – (14 921 ) – (14 921 ) (6 275 ) (21 196 )
Share capital issued (Note 16) 9 – – (9 ) – – – –
Share-based payments (Note 27) – – – 397 – 397 – 397
Dividends declared (Note 29) – – – – (3 509 ) (3 509 ) (3 890 ) (7 399 )
As at 31 December 2021
Attributable to asset held for
sale (Note 15) – – – (52 893 ) (196 006 ) (248 899 ) – (248 899 )
154
CONSOLIDATED STATEMENT OF
CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2022
2022 2021
Notes US$’000 US$’000
Cash flows from operating activities
Cash generated by operations 23.1 82 799 103 902
Working capital adjustments 23.2 (9 889 ) (7 107 )
Interest received 5 303 202
Interest paid 18, 23.3 (2 933 ) (2 457 )
Income tax paid 20 (8 435 ) (23 329 )
Income tax received 20 1 187 96
Cash flows used in investing activities
(59 672 ) (68 686 )
Purchase of property, plant and equipment 8 (11 920 ) (3 985 )
Waste stripping costs capitalised 8 (47 948 ) (64 725 )
Proceeds from sale of property, plant and equipment 196 24
Cash flows used in financing activities
(24 909 ) (19 025 )
Lease liabilities repaid 18 (1 846 ) (1 660 )
Net financial liabilities repaid 23.3 (7 734 ) (7 194 )
Financial liabilities repaid (17 627 ) (26 393 )
Financial liabilities raised 9 893 19 199
Share buyback 16 (1 157 ) –
Dividends paid to holders of the parent (3 623 ) (3 486 )
Dividends paid to non-controlling interests (10 549 ) (6 685 )
Net decrease in cash and cash equivalents
(21 549 ) (16 404 )
Cash and cash equivalents at beginning of year 31 057 49 827
Foreign exchange differences (787 ) (2 366 )
Cash and cash equivalents at end of year
Cash and cash equivalents at end of year
14 8 721 30 913
Cash and cash equivalents at end of year – asset held for sale
15 – 144
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NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
1. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1.1 Corporate information
1.1.1 Incorporation
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 15 March 2023.
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 2022.
Name and registered address of
company
Share-
holding
Cost of
investment
1
Country of
incorporation
Nature of business
Subsidiaries
Gem Diamond Technical Services
(Proprietary) Limited
2
Illovo Corner
24 Fricker Road
Illovo Boulevard
Johannesburg
South Africa
100% US$17 RSA Technical, financial and management
consulting services.
Letšeng Diamonds (Proprietary)
Limited
2
Letšeng Diamonds House
Corner Kingsway and Old School Roads
Maseru
Lesotho
70% US$126 000 303 Lesotho Diamond mining and holder of
mining rights.
Gem Diamonds Botswana
(Proprietary) Limited
2,3
The Courtyard unit 7A
Plot 54513 Village
Gaborone
Botswana
100% US$5 844 579 Botswana Diamond mining; evaluation and
development; and holder of mining
licences and concessions.
Gem Diamonds Investments Limited
2
Suite 1, 7th Floor,
50 Broadway, London
SW1H 0BL United Kingdom
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), ceased to be classified as a discontinued operation held for sale during the current financial reporting
period. Refer Note 15, Assets held for sale.
156
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, ie Board of Directors. The main geographical regions and the type of products and services from which each reporting
segment derives its revenue from are:
• Lesotho (diamond mining activities);
• Belgium (sales, marketing and manufacturing of diamonds);
• BVI, RSA, UK and Cyprus (technical and administrative services); and
• Botswana (diamond mining activities) ceased to be classified as a discontinued operation held for sale during the current
financial reporting period. Refer Note 15, Assets held for sale.
Management monitors the operating results of the geographical units separately for the purpose of making decisions about
resource allocation and performance assessment.
Gem Diamonds Botswana (Proprietary) Limited (Ghaghoo Diamond Mine), which was classified as a discontinued operation held
for sale and disclosed separately as the discontinued operation segment in prior years, has ceased to be classified as a
discontinued operation held for sale during the current financial reporting period, refer Note 15, Assets held for sale. The 31
December 2021 comparative segment information has been restated to re-present the previous discontinued operation
segment as the Botswana segment as part of the Group's continuing operations.
Segment performance is evaluated based on operating profit or loss. Intersegment transactions are entered into under normal
arm’s length terms in a manner similar to transactions with third parties. Segment revenue, segment expenses and segment
results include transactions between segments. Those transactions are eliminated on consolidation.
Segment revenue is derived from mining activities, polished manufacturing margins, and diamond analysis and manufacturing
services.
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:
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1. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
1.1 Corporate information (continued)
1.1.3 Segment information (continued)
Year ended 31 December 2022
Lesotho Belgium
BVI, RSA, UK
and Cyprus
1
Botswana Total
US$’000 US$’000 US$’000 US$’000 US$’000
Revenue from contracts with
customers
Total revenue 186 087 189 497 7 326 – 382 910
Intersegment (185 782) (865) (7 326) – (193 973)
External customers
305 188 632 – – 188 937
Depreciation and amortisation 43 267 263 1 081 80 44 691
– Depreciation and mining asset
amortisation
6 982 263 1 081 80 8 406
– Waste stripping cost amortisation 36 285 – – – 36 285
Share-based equity transactions (33) (2) (218) – (253)
Segment operating profit/(loss)
46 060 1 307 (10 158) (2 688) 34 521
Net finance costs (2 569) (17) (1 294) (209) (4 089)
Profit/(loss) before tax
43 491 1 290 (11 452) (2 897) 30 432
Income tax expense (10 236) (195) 154 – (10 277)
Profit/(loss) for the year
33 255 1 095 (11 298) (2 897) 20 155
EBITDA
50 842 1 625 (8 781) – 43 686
Segment non-current assets
308 889 1 516 627 28 311 060
Segment assets
350 640 2 411 6 676 518 360 245
Segment liabilities
43 987 1 677 2 097 3 401 51 162
Other segment information
Net cash and short-term deposits
2
(2 627) 660 5 231 1 3 265
Capital expenditure
– Property, plant and equipment 11 894 7 19 – 11 920
– Net movement in rehabilitation asset
3
858 – – (573) 285
– Waste cost capitalised 47 948 – – – 47 948
Total capital expenditure
60 700 7 19 (573) 60 153
Average number of employees
employed under contracts of service 322 7 22 19 370
1
No revenue was generated in BVI and Cyprus.
2
Calculated as cash and short-term deposits less drawn down bank facilities (excluding 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 and Botswana segments.
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$48.7 million arising from sales reported in the Belgium segment.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
158
1. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
1.1 Corporate information (continued)
1.1.3 Segment information (continued)
Segment non-current assets do not include deferred tax assets of US$6.0 million and financial instruments of US$2.9 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$19.4 thousand.
Segment assets and liabilities do not include deferred tax assets and liabilities of US$6.0 million and US$82.0 million respectively.
Total revenue for the year decreased compared to the prior year mainly due to a decrease in the volume of carats sold of 107 498
(2021: 109 697) and lower recoveries of greater than 100 carat diamonds. An average sales price of US$1 755 per carat (2021:
US$1 835 per carat) was achieved.
Year ended 31 December 2021 Lesotho Belgium
BVI, RSA, UK and
Cyprus
1
Botswana* Total*
US$’000 US$’000 US$’000 US$’000 US$’000
Revenue from contracts with
customers
Total revenue 198 816 202 461 7 031 – 408 308
Intersegment (198 581) (837) (7 031) – (206 449)
External customers
235 201 624 – – 201 859
Depreciation and amortisation 54 012 350 1 063 – 55 425
– Depreciation and mining asset
amortisation 7 199 350 1 063 – 8 612
– Waste stripping cost amortisation 46 813 – – – 46 813
Share-based equity transactions (105) (4) (286) (2) (397)
Segment operating profit/(loss)
59 008 1 238 (9 835) (3 533) 46 878
Net finance costs (2 395) (1) (1 346) (221) (3 963)
Profit/(loss) before tax
56 613 1 237 (11 181) (3 754) 42 915
Income tax expense (14 661) (178) (723) – (15 562)
Profit/(loss) for the year
41 952 1 059 (11 904) (3 754) 27 353
EBITDA
64 328 1 625 (8 584) (2 047) 55 322
Segment non-current assets
306 777 161 1 788 1 413 310 139
Segment assets
369 105 1 985 6 312 2 097 379 499
Segment liabilities
39 440 351 11 603 4 100 55 494
Other segment information
Net cash and short-term deposits
2
24 175 1 561 (5 014) 144 20 866
Capital expenditure
– Property, plant and equipment 3 952 7 32 – 3 991
– Net movement in rehabilitation asset
3
(1 345) – – – (1 345)
– Waste cost capitalised 64 725 – – – 64 725
Total capital expenditure
67 332 7 32 – 67 371
Average number of employees
employed under contracts of service 304 6 22 22 354
*Gem Diamonds Botswana (Proprietary) Limited (Ghaghoo Diamond Mine), previously reported as the discontinued operation segment in prior periods, ceased to be classified as a
discontinued operation held for sale during the current financial reporting period and the comparative segment information has been restated to re-present the previous discontinued
operation segment as the Botswana segment. Refer Note 15, Assets held for sale.
1
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 2021 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.
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1. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
1.1 Corporate information (continued)
1.1.3 Segment information (continued)
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$132.5 thousand
Segment assets and liabilities do not include deferred tax assets and liabilities of US$5.1 million and US$82.5 million respectively.
1.2 Summary of significant accounting policies
1.2.1 Basis of preparation
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 adopted certain standards and amendments for the first time, which became effective for the Group on 1 January
2022 and are listed in the table below. The adoption of these new accounting pronouncements has not had a significant impact
on the consolidated financial statements of the Group nor the accounting policies, methods of computation or presentation
applied by the Group. Other than the changes described below, the accounting policies are consistent with those of the previous
financial year.
Amendments and new
standards
Description
Amendments to IFRS 16 Covid-19-Related Rent Concessions beyond 30 June 2021
Amendments to IAS 37 Onerous contracts – costs 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
Improvement IFRS 1 Subsidiary as a first-time adopter
Improvement IFRS 9 Fees in the “10 per cent” test for derecognition of financial liabilities
Improvement IAS 41 Agriculture – Taxation in fair value measurements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
160
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
Description Effective date*
IFRS 17 Insurance contracts 1 January 2023
Amendments to IAS 1 Classification of liabilities as current or non-current 1 January 2024
Amendments to IAS 8 Definition of Accounting Estimates 1 January 2023
Amendments to IAS 1 and IFRS
Practice Statement 2
Disclosure of Accounting Policies 1 January 2023
Amendments to IAS 12 Deferred Tax related Assets and Liabilities arising from a Single Transaction 1 January 2023
Amendments to IFRS 16 Lease Liability in a Sale and Leaseback 1 January 2024
Amendments to IFRS 10 and
IAS 28
Sale or Contribution of Assets between an Investor and its Associate or Joint
Venture
Pending
* Annual periods beginning on or after.
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.
The Group’s net cash at 31 December 2022 was US$3.3 million (31 December 2021: net cash US$20.9 million). Following the
successful refinancing of the Group’s facilities for a three-year period from 23 December 2021 in the prior year and securing the
project debt facility for the replacement of the PCA in the current year, the Group’s undrawn facilities at 31 December 2022
amounted to US$82.6 million, resulting in strong liquidity (defined as net cash and undrawn facilities) of US$85.9 million (31
December 2021: US$95.1 million). The Group’s Revolving Credit facilities, which total US$74.1 million when fully unutilised,
mature on 22 December 2024. In addition, there is a US$5.9 million general banking facility with no set expiry date, but is
reviewed annually, and US$8.0 million which is the project debt facility for the replacement of the PCA. This facility expires in May
2027 (Refer Note 17, Interest-bearing loans and borrowings). The uncertainty that exists around the ongoing impact of the
Russian conflict on Ukraine on future cash flows was considered by performing sensitivities on costs, diamond pricing and
continued strengthening or weakening of the US dollar against the Lesotho loti.
After reviewing detailed assessment performed by management and 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.
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1. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
1.2 Summary of significant accounting policies (continued)
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 2022.
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 intra-group 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;
• exploratory drilling, trenching and sampling;
• determining and examining the volume and grade of the resource;
• surveying transportation and infrastructure requirements; and
• conducting market and finance studies.
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.
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 proven and probable 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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
162
1. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
1.2 Summary of significant accounting policies (continued)
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
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 Method Useful life
Mining assets Straight line Lesser of life of mine or period of mining lease
Decommissioning assets Straight line Lesser of life of mine or period of mining lease
Leasehold improvements Straight line Three years; or lesser of life of mine or period of mining lease
Plant and equipment Straight line Three to 15 years
Other assets Straight line Two to eight years
An item of property, plant and equipment and any significant part initially recognised is derecognised upon disposal (ie, 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.
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1. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
1.2 Summary of significant accounting policies (continued)
1.2.7 Borrowing costs
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.
1.2.8 Non-current assets held for sale and discontinued operations
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. represents a separate major line of business or geographical area of operations;
b. is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations; or
c. is a subsidiary acquired exclusively with a view to resale.
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 notes to the consolidated statement of financial position
for the comparative period as at 31 December 2021 exclude amounts for assets and liabilities held for sale, unless stated
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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
164
1. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
1.2 Summary of significant accounting policies (continued)
1.2.10 Financial instruments
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 timeframe established by regulation or convention in the
marketplace (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
Financial liabilities are initially measured at fair value net of (in the case of financial liabilities not at fair value through profit or
loss) directly attributable transaction costs. The Group’s 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 1.2.6, Property, plant and equipment, 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.
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1. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
1.2 Summary of significant accounting policies (continued)
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.
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).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
166
1. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
1.2 Summary of significant accounting policies (continued)
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.
The Group maintains strategic stockpiles in line with operational and insurance requirements. In normal mining activities, lower
grade ore is consequentially mined and maintained in a separate stockpile. Although this lower grade stockpile could be
processed as emergency plant feed, its overall intention is it to be processed at the end of life of mine. As a result, the associated
mining costs for this stockpile are allocated at the net realisable value and the balance of the costs are allocated to the Main pipe
strategic stockpiles.
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 that are held to meet the Group's short-term cash commitments.
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 which are repayable on demand and form an integral part of the Group's cash
management.
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.
Treasury shares
Own equity instruments that are reacquired are recognised at cost, including transaction costs, and deducted from equity. These
are disclosed as treasury shares. No gain or loss is recognised in profit or loss in the purchase, sale, issue or cancellation of the
Group’s own equity instruments. Any difference between the carrying amount and the consideration, if reissued, is recognised in
equity.
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 share 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.
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1. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
1.2 Summary of significant accounting policies (continued)
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.
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 Note1.2.28, Critical accounting estimates and
judgements.
The Group periodically releases the share-based equity reserve to retained earnings in relation to lapsed and forfeited options
subsequent vesting date.
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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
168
1. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
1.2 Summary of significant accounting policies (continued)
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.
1.2.20 Taxation
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.
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1. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
1.2 Summary of significant accounting policies (continued)
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.
1.2.22 Leases
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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
170
1. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
1.2 Summary of significant accounting policies (continued)
1.2.22 Leases (continued)
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 services
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.
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Gem Diamonds Limited Annual Report and Accounts 171
1. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
1.2 Summary of significant accounting policies (continued)
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.
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.
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.
Task Force on Climate-related Financial Disclosures (TCFD)
In preparing the Consolidated Financial Statements management continues to consider the impact of climate change,
particularly in the context of the disclosures included in the Strategic Report 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 2024, after which management will assess the impact on the Group’s going concern. These considerations
also had no material impact on any Property, Plant and Equipment or Commitments. For Letšeng, the physical risks identified of
severe weather conditions, are similar to its current operating conditions of drought, high wind, snow and rainfall. 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 on
reducing 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.
The Russian invasion of Ukraine
The Russian invasion of Ukraine has significantly increased the price of consumables, especially diesel and explosive costs used in
the mining activities, and inflation rates across the jurisdictions where the Group operates. Management has considered the
impact of increased costs on future cash flows, and whether these costs and inflation rates are short or long term in nature.
Management has used current pricing and inflation estimates for shorter-term forecasts, and normalised these to average
historic levels for the medium to long term.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
172
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)
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.
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, 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. 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 2040 (2021: 2037). The extension was as a result of an additional Satellite pit cutback
included in the current LoM model.
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% (2021:
5.0%) for operating costs beyond 2025. Up to 2025, inflation rates applied ranged between 5.7% – 8.9%.
Capital costs in the short term have been based on management’s capital programme after which a fixed percentage of
operating costs has 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 2022 of LSL17.02
(31 December 2021: LSL15.96).
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 12.5% for revenue (2021: 11.5%) and 15.4% for costs (2021: 13.4%) 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.
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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)
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.
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;
• concurrent rehabilitation of the waste rock dump and tailings facilities will take place during the operational phase; 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.
At the Ghaghoo mine site, the following judgements were applied:
• the site would be donated to various Botswana Government departments already operating within the mine site area of the
Central Kalahari Desert. Therefore, no costs associated with the rehabilitation of certain roads or rehabilitation and dismantling
infrastructures; and
• the timing of the rehabilitation cost cash flows has been estimated to be five years.
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.
Identifying uncertainties over tax treatments
As disclosed in the prior year, an amended tax assessment was issued to Letšeng by the Revenue Services Lesotho (RSL),
previously the Lesotho Revenue Authority, 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 RSL in March 2020,
which was supported by the opinion of senior counsel. The RSL 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.
On 7 February 2022, Letšeng received an application from the RSL to amend its original grounds for the court application.
Letšeng’s counsel continues to review the RSL’s proposed amendment and has opposed the new application by the RSL.
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 2022
Annual Financial Statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
174
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)
Offsetting of deferred tax assets and deferred tax liabilities of the Group’s subsidiary, Letšeng Diamonds
The Group’s subsidiary, Letšeng Diamonds, is subject to the tax laws and regulations enacted within Lesotho. The corporate tax
laws and regulations currently enacted by the RSL requires a taxpayer to file a claim for offsetting current tax asset and current
tax liabilities, and offsetting deferred tax assets and deferred tax liabilities with the Commissioner within four years after service
of the notice of assessment for the year of assessment to which the claim relates.
The Group, after applying significant judgement, is of the view that Letšeng Diamonds does not have a legal enforceable right to
offset current tax assets against current tax liabilities, and deferred tax assets against deferred tax liabilities within the Lesotho
corporate tax jurisdiction as it is subject to the Commissioner’s approval of the claim submitted for which the outcome is highly
uncertain as the approval is purely subject to the discretion of the Commissioner. On this basis, the Group does not offset
Letšeng Diamonds deferred tax assets and deferred tax liabilities, but rather presents them on a gross basis in the consolidated
statement of financial position. Refer Note 1.2.20, Taxation.
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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Gem Diamonds Limited Annual Report and Accounts 175
2022 2021
US$’000 US$’000
2. REVENUE FROM CONTRACTS WITH
CUSTOMERS
Sale of goods
188 615 201 610
Partnership arrangements
306 235
Rendering of services
16 14
188 937 201 859
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$0.3 million represents the additional uplift from partnership arrangements for
which revenue is recognised when the significant constraints are lifted or resolved and the amount of revenue is guaranteed
(2021: US$0.2 million). At year end 1 457 carats (2021: 894 carats) have significant constraints in recognising revenue relating to
the additional uplift.
No revenue was generated from joint operation arrangements during the current or prior year.
2022 2021*
US$’000 US$’000
3. OTHER OPERATING EXPENSES
Sundry income 61 116
Other expenses – (12)
Ghaghoo care and maintenance costs
2
(2 053) (3 525)
Profit on disposal and scrapping of property, plant and equipment 195 16
COVID-19 related costs
1
(140) (711)
(1 937) (4 116)
*The prior year figures have been re-presented, as Gem Diamonds Botswana (Proprietary) Limited (Ghaghoo Diamond Mine) ceased to be classified as a discontinued operation during
the current financial reporting period. Refer Note 15, Assets held for sale.
1
COVID-19-related costs relating to continued protocols for curbing the spread of the virus.
2
Includes depreciation recognised in the current year of US$80.0 thousand (31 December 2021: nil) and inventory write-down of US$nil (31 December 2021: US$1.5 million).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
176
2022 2021*
US$’000 US$’000
4. OPERATING PROFIT
Operating profit includes operating costs and income as listed below:
Depreciation and amortisation
Depreciation and mining asset amortisation excluding waste stripping cost (6 588) (6 927)
Depreciation of right-of-use assets (1 818) (1 685)
Waste stripping costs amortised (36 285) (46 813)
(44 691) (55 425)
Inventories
Cost of inventories recognised as an expense (including waste stripping costs
amortised) (116 382) (113 737)
Foreign exchange
Foreign exchange gain 1 914 1 923
Lease expenses not included in lease liability
Mine site property (142) (170)
Equipment and service lease (11 154) (8 462)
Contingent rental – Alluvial Ventures (3 556) (6 483)
(14 852) (15 115)
Impairment of non-current assets (702) –
Auditor’s remuneration – EY
Group financial statements (411) (238)
Statutory (242) (212)
(653) (450)
Auditor’s remuneration – other audit firms
Statutory (26) (20)
Other non-audit fees – EY
Other services
1
(56) (41)
Other non-audit fees – other audit firms
Tax services advisory and consultancy (74) (45)
Employee benefits expense
Salaries and wages
2
(17 239) (18 267)
Underlying earnings before interest, tax, depreciation and mining asset
amortisation (underlying EBITDA)
Underlying EBITDA is shown, as the Directors consider this measure to be a
relevant guide to the operational performance of the Group and excludes such
non-operating costs and income as listed below. The reconciliation from
operating profit to underlying EBITDA is as follows:
Operating profit 34 521 46 878
Other operating expenses
3
1 718 3 405
Impairment of non-current assets 702 –
Foreign exchange gain (1 914) (1 923)
Share-based payments 253 397
Depreciation and amortisation (excluding waste stripping cost amortised) 8 406 8 612
Underlying EBITDA 43 686 57 369
*The prior year figures have been re-presented, as Gem Diamonds Botswana (Proprietary) Limited (Ghaghoo Diamond Mine) ceased to be classified as a discontinued operation during
the current financial reporting period. Refer Note 15, Assets held for sale.
1
Includes services related to forensic investigation performed on allegations of diesel theft at Letšeng.
2
Includes contributions to defined contribution plan of US$0.5 million (31 December 2021: US$0.6 million). An average of 370 employees excluding contractors were employed during
3
Excludes COVID-19-related costs of US$0.1 million (31 December 2021: US$0.7 million) which are considered as operating costs. Includes Ghaghoo-related care and maintenance
costs of US$2.1 million (31 December 2021: US$3.5 million), which are considered non-operating costs.
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Gem Diamonds Limited Annual Report and Accounts 177
2022 2021*
US$’000 US$’000
5. NET FINANCE COSTS
Finance income
Bank deposits 303 197
Insurance asset 110 5
Total finance income
413 202
Finance costs
Finance costs on borrowings (2 552) (2 232)
Finance costs on lease liabilities (666) (525)
Finance costs on unwinding of rehabilitation and decommissioning provision (1 284) (1 408)
Total finance costs
(4 502) (4 165)
(4 089) (3 963)
*The prior year figures have been re-presented, as Gem Diamonds Botswana (Proprietary) Limited (Ghaghoo Diamond Mine) ceased to be classified as a discontinued operation during
the current financial reporting period. Refer Note 15, Assets held for sale.
Finance income relates to interest earned on cash, short-term deposits and insurance assets.
Finance costs include interest incurred on borrowings and associated unwinding of facility credit underwriting fees, finance lease
liabilities and the unwinding of rehabilitation provisions.
2022 2021*
US$’000 US$’000
6. INCOME TAX EXPENSE
Current
– Foreign (6 054) (10 197)
Withholding tax
– Foreign (1 356) (639)
Deferred
– Foreign (2 867) (4 726)
Income tax expense
(10 277) (15 562)
Profit before taxation 30 432 42 915
% %
Reconciliation of tax rate
Applicable income tax rate 25.0 % 25.0 %
Permanent differences
1
0.4 % 2.5 %
Unrecognised deferred tax assets 6.4 % 5.3 %
Effect of foreign tax at different rates 2.8 % 2.0 %
Withholding tax and unremitted earnings (0.8) % 1.5 %
Effective income tax rate
33.8 % 36.3 %
The tax rate reconciles to the statutory Lesotho corporation tax rate of 25% rather than the statutory UK corporation tax
rate of 19% as this is the jurisdiction in which the majority of the Group’s taxes are incurred.
*The prior year figures have been re-presented, as Gem Diamonds Botswana (Proprietary) Limited (Ghaghoo Diamond Mine) ceased to be classified as a discontinued operation during
the current financial reporting period. Refer Note 15, Assets held for sale.
1
Permanent differences comprise CSI at Letšeng Diamonds, legal fees of a capital nature and share-based payments, all of which are non-deductible for tax purposes.
The corporate income tax rate in the United Kingdom was increased from 19% to 25% for companies effective from 1 April 2023.
The new corporate tax rate of 25% is not expected to have a material impact on the Group. This event did not require any
adjustment to the financial statements and will be applicable to Gem Diamonds Limited, the Groups’ parent company.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
178
2022 2021
US$’000 US$’000
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 20 155 27 353
Less: Non-controlling interests (9 977) (12 586)
Net profit attributable to ordinary equity holders of the parent for basic and
diluted earnings
10 178 14 767
Number of ordinary shares outstanding at end of year (’000) 140 923 140 516
Weighted number of share options exercised during the year (’000) (145) (223)
Share buyback during the year (’000) (977) –
Weighted average number of ordinary shares outstanding during the year (’000) 139 801 140 293
Basic earnings per share attributable to ordinary equity holders of the parent (cents) 7.3 10.5
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.
2022 2021
Number of
shares
Number of
shares
Weighted average number of ordinary shares outstanding during the year
139 802 140 293
Effect of dilution:
– Future share awards under the Employee Share Option Plan
1 857 1 796
Weighted average number of ordinary shares outstanding during the year adjusted for
the effect of dilution
141 659 142 089
Diluted earnings per share attributable to ordinary equity holders of the parent (cents)
7.2 10.4
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.
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Gem Diamonds Limited Annual Report and Accounts 179
8. PROPERTY, PLANT AND EQUIPMENT
Stripping
activity
asset
Mining
asset
De-
commis-
sioning
assets
Lease-
hold
improve-
ment
Plant and
equip-
ment
Other
assets
1
Total
As at 31 December 2022
Cost
As at 1 January 2022 599 558 107 999 3 769 51 418 74 504 7 304 844 552
Additions - Ghaghoo (Note 15) – 585 – 6 135 10 594 1 240 18 554
Additions 47 948 242 – – 11 391 287 59 868
Net movement in rehabilitation provision 858 – – (307) (266) – 285
Disposals – – – – (23) (116) (139)
Reclassifications – 262 – 113 (685) 310 –
Foreign exchange differences (39 028) (5 116) (250) (3 619) (6 223) (504) (54 740)
As at 31 December 2022
609 336 103 972 3 519 53 740 89 292 8 521 868 380
Accumulated depreciation/
amortisation/impairment
As at 1 January 2022 414 706 44 874 3 769 26 648 55 544 5 384 550 925
Additions - Ghaghoo (Note 15) – 585 – 5 567 9 746 1 243 17 141
Charge for the year 36 080 958 – 2 925 2 388 522 42 873
Impairment
2
– – – 161 541 – 702
Disposals – – – – (21) (116) (137)
Foreign exchange differences (25 470) (3 853) (250) (2 161) (4 471) (418) (36 623)
As at 31 December 2022
425 316 42 564 3 519 33 140 63 727 6 615 574 881
Net book value at 31 December 2022
184 020 61 408 – 20 600 25 565 1 906 293 499
1
Other assets comprise motor vehicles, computer equipment, furniture and fittings, and office equipment.
2
The impairment relates to the assets impaired at Gem Diamonds Botswana (Proprietary) Limited (Ghaghoo Diamond Mine) following it ceasing to be classified as a discontinued
operation held for sale during the current financial reporting period. Refer Note 15, Assets held for sale.
Stripping
activity
asset
Mining
asset
De-
commis-
sioning
assets
Lease-
hold
improve-
ment
Plant and
equip-
ment
Other
assets
1
Total
As at 31 December 2021
Cost
Balance at 1 January 2021 587 355 115 050 4 119 55 955 79 468 7 601 849 548
Additions 64 725 – – 36 3 850 105 68 716
Net movement in rehabilitation provision (1 069) – – (138) (138) – (1 345)
Disposals – – – (508) (932) (191) (1 631)
Reclassifications – – – 473 (810) 337 –
Foreign exchange differences (51 453) (7 051) (350) (4 400) (6 934) (548) (70 736)
As at 31 December 2021
599 558 107 999 3 769 51 418 74 504 7 304 844 552
Accumulated depreciation/
amortisation/impairment
As at 1 January 2021 401 443 49 189 4 119 26 204 59 150 5 438 545 543
Charge for the year 46 708 910 – 3 187 2 375 560 53 740
Disposals – – – (508) (929) (187) (1 624)
Foreign exchange differences (33 445) (5 225) (350) (2 235) (5 052) (427) (46 734)
As at 31 December 2021
414 706 44 874 3 769 26 648 55 544 5 384 550 925
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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
180
Right-of-use assets
Plant and
equipment
Motor
vehicles Buildings Total
US$’000 US$’000 US$’000 US$’000
9. RIGHT-OF-USE ASSETS
As at 31 December 2022
Cost
As at 1 January 2022
56 94 5 761 5 911
Additions 3 259 384 1 644 5 287
Derecognition of lease (27) (38) (672) (737)
Foreign exchange differences (98) (19) (303) (420)
As at 31 December 2022
3 190 421 6 430 10 041
Accumulated depreciation
As at 1 January 2022 20 63 2 691 2 774
Charge for the year 695 96 1 027 1 818
Derecognition of lease (24) (38) (672) (734)
Foreign exchange differences (3) (6) (148) (157)
As at 31 December 2022
688 115 2 898 3 701
Net book value at 31 December 2022
2 502 306 3 532 6 340
As at 31 December 2021
Cost
As at 1 January 2021
2 217 364 6 444 9 025
Additions – – 507 507
Derecognition of lease (2 141) (260) (768) (3 169)
Foreign exchange differences (20) (10) (422) (452)
As at 31 December 2021
56 94 5 761 5 911
Accumulated depreciation
As at 1 January 2021
1 737 255 2 210 4 202
Charge for the year 437 75 1 173 1 685
Derecognition of lease (2 141) (260) (523) (2 924)
Foreign exchange differences (13) (7) (169) (189)
As at 31 December 2021
20 63 2 691 2 774
Net book value at 31 December 2021
36 31 3 070 3 137
Plant and equipment mainly comprise back-up power generating equipment utilised at Letšeng. Motor vehicles mainly comprise
vehicles utilised by contractors at Letšeng. Buildings comprise office buildings in Maseru, Antwerp, London, Gaborone 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, a new lease contract for back-up power generating equipment at Letšeng was entered into resulting in the
recognition of right-of-use assets and lease liabilities associated with the new lease. Furthermore, Gem Diamonds Marketing
Services and Baobab Technologies entered into new contracts for the rental of office space in Antwerp as the original contracts
both came to an end. The new contracts were assessed as containing leases, which resulted in the recognition of the new
associated right-of-use assets and lease liabilities. Refer Note 18, Lease liabilities and Note 23.1, Cash generated by operations.
During the prior year, the original 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 were derecognised. 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
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9. RIGHT-OF-USE-ASSETS (continued)
There were no gains or losses (2021: US$0.1 million) relating to the derecognition of leases in the Group during the year. 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 (2021: US$0.3 million) from the sub-leasing of office buildings in Maseru. The Group expects to receive the following lease
payments from the operating sub-leasing in the following years:
US$ ’000
2023
353
2024
376
2025
227
Intangibles Goodwill
1
Total
US$’000 US$’000 US$’000
10. INTANGIBLE ASSETS
As at 31 December 2022
Cost
Balance at 1 January 2022
– 11 962 11 962
Foreign exchange translation difference – (741) (741)
Balance at 31 December 2022
– 11 221 11 221
Accumulated amortisation
Balance at 1 January 2022
– – –
Amortisation – – –
Balance at 31 December 2022
– – –
Net book value at 31 December 2022
– 11 221 11 221
As at 31 December 2021
Cost
Balance at 1 January 2021
791 12 997 13 788
Foreign exchange translation difference – (1 035) (1 035)
Scrapping (791) – (791)
Balance at 31 December 2021 – 11 962 11 962
Accumulated amortisation
Balance at 1 January 2021
791 – 791
Amortisation – – –
Scrapping (791) – (791)
Balance at 31 December 2021
– – –
Net book value at 31 December 2021
– 11 962 11 962
1
Goodwill allocated to Letšeng Diamonds. Refer Note 11, Impairment testing.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
182
2022 2021
US$’000 US$’000
11. 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 2022. 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 2022, 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 11 221 11 962
As at 31 December 2022
11 221 11 962
Movement in goodwill relates to foreign exchange translation from functional to presentation currency, as disclosed within Note
10, Intangible assets.
The discount rates are outlined below and represents the nominal pre-tax rate. These rates are 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.
2022
%
2021
%
Discount rate – Letšeng Diamonds
Applied to revenue 12.5 11.5
Applied to costs 15.4 13.4
Value in use
The mining lease period at Letšeng extends to 2029 with an exclusive option to renew for a further 10 years to 2039. The latest
open pit mine plan available which has been used to project the cash flows, reflects that the open pit mining is expected to cease
in 2040. In terms of IAS 36, cash flows are projected for a period up to the date of the mining lease period if it is earlier than the
ceasing of the mining, ie 2039. The mine plan includes the next open pit cutback in the Satellite pipe (C6W). This mine plan takes
into account the available reserves and other relevant inputs such as diamond pricing, costs and geotechnical parameters, and
includes the steeper slope angles implemented in the Main pit Cut 4 East and Cut 4 West cutbacks. In addition, cost savings
associated with the optimisation and right-sizing which commenced at Letšeng in early 2023 have also been included in the
value-in-use model.
A comprehensive Underground Feasibility Study commenced in mid-2022 to confirm the feasibility of mining underground. The
completion of this study will take place in 2023 (and has therefore not been included in the Value in use valuation), and will (i)
assess the viability of an earlier shift to underground mining of the Satellite pipe and (ii) inform the trade-off between
underground mining and proceeding with the next open pit cutback in the Satellite pipe (C6W).
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 2022
exceeded the carrying value by US$92.2 million (31 December 2021: US$56.8 million). The valuation is sensitive to input
assumptions particularly in relation to the foreign exchange assumption of the US dollar (US$) to the Lesotho loti (LSL) at year
end, future price growth for diamonds and increase in operating costs. 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, operating costs and diamond prices, which would result in the recoverable amount equating to the
carrying amount. An 8% strengthening of the LSL to the US$ to US$1:LSL15.60 or a reduction of 6.5% 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 of the variability in consumable prices such as diesel and explosive costs, a
third sensitivity on changes in costs was performed. An 8% increase in current estimated operating costs of US$2.5 billion over
the life of mine would result in the recoverable amount equating to the current carrying amount, with other valuation
assumptions remaining the same.
As a result, no impairment charge was recognised for the Letšeng Diamonds CGU during the year.
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2022 2021
US$’000 US$’000
12. RECEIVABLES AND OTHER ASSETS
Non-current
Deposits 96 109
Insurance asset
1
2 820 1 169
2 916 1 278
Current
Trade receivables 23 25
Prepayments
2
1 350 975
Deposits 21 19
Other receivables 249 122
Vat receivable 3 212 2 954
4 855 4 095
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 – 2
Past due but not impaired:
Less than 30 days – –
30 to 60 days – –
60 to 90 days – –
90 to 120 days – 23
> 120 days 23 –
23 25
1 This non-current asset relates to Letšeng’s Multi-aggregate Protection Insurance Policy with The Lesotho National Insurance Group (LNIGC) entered into the prior year. This policy has
a remaining tenure of three-and-a-half years at year end. During the current year the policy was increased to LSL140.0 million (US$8.2 million) (31 December 2021: LSL100.0 million
(US$6.2 million)). The premium payments were increased to LSL30.0 million (US$1.8 million) (31 December 2021: LSL20.0 million) (US$1.2 million) for the remainder of the policy each
payable annually in advance. Refer Note 24, Commitments and contingencies. The policy gives Letšeng the right to claim up to LSL75.0 million (31 December 2021: LSL50.0 million)
for each-and-every-loss and LSL150.0 million (31 December 2021: LSL100.0 million) in the aggregate (subject to terms and conditions contained in 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 service fee of LSL 2.1 million ( US$128 thousand) as expensed within other operating expenses. The non-current financial asset is measured at amortised cost in line with
IFRS 9 Financial Instruments. Interest is earned on the unrealised premium and recognised as finance income. The second premium payment of LSL 30.0 million (US$1.8 million) 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 of US$0.4 million (31 December 2021: US$0.4 million) which were also funded through Premium Finance Partners
(Proprietary) Limited. This prepayment is ceded in favour of Premium Finance Partners (Proprietary) Limited. Refer Note 17, Interest-bearing loans and borrowings.
Based on the nature of the Group’s client base and the negligible exposure to credit risk through its client base, insurance asset
and other financial assets, the expected credit loss is insignificant and has no impact on the Group.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
184
2022 2021
US$’000 US$’000
13. INVENTORIES
Diamonds on hand 16 745 18 303
Ore Stockpile 5 053 4 702
Consumable stores
1
8 572 8 153
30 370 31 158
1
Includes consumable stores from Ghaghoo of US$0.3 million in the current year.
Inventory is carried at the lower of cost or net realisable value. During the year, lower grade ore stockpile inventory at Letšeng
was written down by US$1.5 million (31 December 2021: nil) to net realisable value. Part of this stockpile was historically treated
by Alluvial Ventures, the third-party plant contractor. When this contract expired during the year and the plant was dismantled,
the stockpile level increased to the end of the period. Refer Note 1.2.13, Inventories.
2022 2021
US$’000 US$’000
14. CASH AND SHORT-TERM DEPOSITS
Cash on hand 4 3
Bank balances 6 006 27 673
Short term bank deposits 2 711 3 237
8 721 30 913
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 2022, the Group had US$82.6 million (31 December 2021: US$74.3 million) of undrawn facilities, representing
the LSL750.0 million (US$44.1 million) three-year secured (31 December 2021: unsecured) revolving working capital facility at
Letšeng, the Letšeng ZAR100.0 million (US$5.9 million) general banking facility, the available portion of the PCA project debt
facility of ZAR43.5 million (US$2.6 million) and US$30.0 million from the Company’s secured (31 December 2021: unsecured)
revolving credit facility. For further details on these facilities, refer Note 17, Interest-bearing loans and borrowings.
15. ASSETS HELD FOR SALE
Since 2019, in line with the strategic objective to dispose of non-core assets, the Board of Directors and Management have
remained committed to the sale of Gem Diamonds Botswana (Pty) Ltd (GDB), which owns the Ghaghoo Diamond Mine. In May
2022, the sales agreement which Gem Diamonds Limited had entered into with Okwa Diamonds (Pty) Ltd (Okwa Diamonds), on
23 August 2021, lapsed, following the inability of Okwa Diamonds’ owners to secure a funding partner for the transaction. There
has been no new agreement entered into for the sale of the asset by year end, although a number of interested parties are
performing due diligence procedures. As a result of the developments above, the sale of GDB no longer met the highly probable
requirements as set out in the Group's accounting policy 1.2.8 Non-current assets held for sale and discontinued operations at
year end and the Board of Directors and Management have reviewed various alternatives of disposal and closure of the asset. As
a result, GDB has ceased to be classified as a discontinued operation held for sale as at the 31 December 2022. All impacted prior
year figures in the consolidated statement of profit or loss and relevant notes have been re-presented to reflect GDB as part of
continuing operations. The assets and liabilities of GDB are no longer disclosed as held for sale in the current reporting period.
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15. ASSETS HELD FOR SALE (continued)
The table below represents the prior year re-presentation for all amounts in the consolidated statement of profit or loss and
notes thereto which were re-presented.
As
previously
reported
Re-
presentation
adjustment
Re-
presented
figures
2021 2021 2021
US$’000 US$’000 US$’000
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
CONTINUING OPERATIONS
Other operating expense (591) (3 525) (4 116)
Share-based payments (395) (2) (397)
Foreign exchange gain/(loss) 1 929 (6) 1 923
Operating profit 50 411 (3 533) 46 878
Net finance costs (3 742) (221) (3 963)
– Finance costs (3 944) (221) (4 165)
Profit before tax for the year 46 669 (3 754) 42 915
Profit after tax for the year 31 107 (3 754) 27 353
DISCONTINUED OPERATION
Loss after tax from discontinued operation (3 754) 3 754 –
Earnings per share (cents)
Earnings per share (cents) for continuing operations
– Basic earnings for the year attributable to ordinary equity holders of the parent 13.2 (2.7) 10.5
– Diluted earnings for the year attributable to ordinary equity holders of the parent 13.0 (2.6) 10.4
3 OTHER OPERATING EXPENSES
Ghaghoo care and maintenance costs – (3 525) (3 525)
4
OPERATING PROFIT
Foreign exchange
Foreign exchange gain/(loss) 1 929 (6) 1 923
Auditor’s remuneration – EY
Statutory
(190)
(22)
(212)
Employee benefits expense
Salaries and wages (17 767) (500) (18 267)
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 50 411 (3 533) 46 878
Other operating expenses (120) 3 525 3 405
Foreign exchange (gain)/loss (1 929) 6 (1 923)
Share-based payments 395 2 397
Underlying EBITDA 57 369 – 57 369
5 NET FINANCE COSTS
Finance costs on unwinding of rehabilitation and decommissioning provision (1 187) (221) (1 408)
6
INCOME TAX EXPENSE
Profit before taxation
46 669
(3 754)
42 915
Reconciliation of tax rate
%
%
%
Permanent differences
2.3
0.2
2.5
Unrecognised deferred tax assets
3.1
2.2
5.3
Effect of foreign tax at different rates
1.6
0.4
2.0
Withholding tax and unremitted earnings
1.4
0.1
1.5
Effective income tax rate
33.4
2.9
36.3
27
SHARE-BASED PAYMENTS
Equity-settled share-based payment transactions charged to the statement of
profit or loss
395 2 397
Equity-settled share-based payment transactions charged to the statement of
profit or loss – discontinued operation
2 (2) –
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
186
15. ASSETS HELD FOR SALE (continued)
Depreciation of US$0.1 million was recognised in the current year relating to the underlying depreciable assets within GDB which
was suspended whilst GDB was classified as held for sale.
The recoverable amount of all items of property, plant and equipment was assessed and an impairment charge of US$(0.7)
million was recognised, reducing the carrying value of the leasehold improvements and plant and equipment categories to zero.
Refer Note 8, Property, plant and equipment. This impairment has been included in the Botswana segment in Note 1.1.3
Segment information.
2022 2021
US$’000 US$’000
ASSETS
Non-current assets
Property, plant and equipment – 1 413
Current assets
Inventories – 477
Receivables and other assets – 63
Cash and short-term deposits – 144
– 684
Total assets
– 2 097
LIABILITIES
Non-current liabilities
Provisions – 3 654
Trade and other payables – 446
Total liabilities
– 4 100
The disposal group's assets held for sale were carried at carrying value which was lower than the disposal group's fair value less
costs to sell in the prior year. The fair value was based on the unobservable market offer from the potential buyer for the disposal
group, accordingly the non-recurring fair value measurement for the prior year was included in level 3 of the fair value hierarchy.
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16. ISSUED SHARE CAPITAL AND RESERVES
Share capital
31 December 2022 31 December 2021
Number
of shares
’000 US$’000
Number
of shares
‘000 US$’000
Authorised – ordinary shares of US$0.01 each
As at year end 200 000 2 000 200 000 2 000
Issued and fully paid balance at beginning of year 140 515 1 406 139 612 1 397
Allotments during the year 408 4 903 9
Number of ordinary shares outstanding at end of year 140 923 1 410 140 515 1 406
Treasury shares (1 520) (1 157) – –
Balance at end of year 139 403 253 140 515 1 406
Share premium
Share premium comprises the excess value recognised from the issue of ordinary shares above its par value.
Other reserves
Foreign
currency
translation
reserve
Share-
based
equity
reserve Total
US$’000 US$’000 US$’000
As at 1 January 2022 (233 276) 6 579 (226 697)
Other comprehensive loss (12 691) – (12 691)
Total comprehensive loss (12 691) – (12 691)
Share capital issue – (4) (4)
Share-based payment expense – 253 253
Transfer to (accumulated losses)/retained earnings – (30) (30)
As at 31 December 2022 (245 967) 6 798 (239 169)
As at 1 January 2021 (218 355) 6 191 (212 164)
Other comprehensive loss (14 921) – (14 921)
Total comprehensive loss (14 921) – (14 921)
Share capital issue – (9) (9)
Share-based payment expense – 397 397
As at 31 December 2021 (233 276) 6 579 (226 697)
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:
2022 2021
Currency US$’000 US$’000
Average rate ZAR/LSL to US$1 16.37 14.79
Year end ZAR/LSL to US$1 17.02 15.96
Average rate Pula to US$1 12.37 11.09
Year end Pula to US$1 12.75 11.76
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
188
16. ISSUED SHARE CAPITAL AND RESERVES (continued)
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.
Treasury shares
During the year, the Board of Directors approved a share buyback programme to purchase up to US$2.0 million of the
Company’s ordinary shares. The sole purpose of the programme is to reduce the capital of the Company and the Company
intends to hold those ordinary shares purchased under the programme in treasury. Such treasury shares are not entitled to
dividends and have no voting rights. The share buyback programme was initiated on 12 April 2022. At 31 December 2022,
1 520 170 shares were bought back at the market value on the date of each buyback, equating to a weighted average price of
60.05 GB pence (78.07 US cents) per share, totalling US$$1.2 million (including transaction costs). This reduction in shares issued
has been taken into account in calculating the earnings per share.
17. INTEREST-BEARING LOANS AND BORROWINGS
On 28 February 2022, Gem Diamonds Limited provided security for both the Letšeng Diamonds and Gem Diamonds Limited RCF
facilities over its bank accounts domiciled in the United Kingdom (US$4.6 million) and on 15 March 2022 the security over its 70%
shareholding in Letšeng Diamonds, refer Note 31, Material partly owned subsidiary, was implemented. This security had the
impact of decreasing the interest rate margin on all facilities by 1.5% from 15 March 2022 and converting the facilities into
secured facilities.
The IBOR phase 2 Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 became effective on 1 January 2021 for the Group. The
IBOR reform has impacted the South African JIBAR and LIBOR linked interest-bearing loans and borrowings within the Group. The
interest-bearing loans and borrowings that remains subject to the South African JIBAR rate include the LSL136.4 million
unsecured project debt facility and the ZAR300.0 million revolving credit facility. The interest-bearing loans and borrowings that
was subject to the US$ three-month LIBOR rate was the US$30.0 million revolving credit facility. The developments on these
facilities from 31 December 2021 and their carrying amounts and maturities as at 31 December 2022 are disclosed in the note
below.
The South African JIBAR rates are yet to transition to alternative benchmark rates at the reporting period end. The Group will
continue to assess the impact of the interest rate benchmark reform on the Group's JIBAR interest-bearing loans and borrowings
as the revised benchmark rates are published or negotiated with the funders.
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17. INTEREST-BEARING LOANS AND BORROWINGS (continued)
Effective interest
rate Maturity
2022
US$’000
2021
US$’000
Non-current
ZAR12.8 million asset-based finance facility
South African
Prime Lending
Rate Repaid 15 July 2022 – 202
LSL450.0 million and ZAR300.0 million
bank loan facility
Central Bank of
Lesotho rate +
3.25% and South
African JIBAR +
3.05%
Credit underwriting fees 22 December 2024 (327) (525)
US$30.0 million bank loan facility
London US$ three-
month LIBOR +
5.00% 22 December 2024 – 9 000
Credit underwriting fees
(225) (337)
LSL136.4 million project debt facility
South African
JIBAR + 2.50%
31 May 2027
4 922 –
4 370 8 340
Current
LSL7.3 million insurance premium finance
2.35 % Repaid 1 June 2022 – 305
ZAR3.5 million insurance premium finance
2.50 % Repaid 1 June 2022
– 155
LSL20.0 million insurance premium finance
3.20 % Repaid 1 June 2022 – 880
ZAR2.5 million insurance premium finance
3.55 % 1 April 2023 60 –
LSL30.0 million insurance premium finance
3.55 % 1 April 2023 719 –
LSL10.9 million insurance premium finance
3.55 % 1 May 2023 262 –
LSL215.0 million bank loan facility
Tranche A
South African
JIBAR + 6.75%
Repaid 30 September
2022 – 439
Tranche B
South African
JIBAR + 3.15% Repaid 31 March 2022 – 752
ZAR12.8 million asset-based finance facility
South African
Prime Lending
Rate Repaid 15 July 2022 – 173
LSL136.4 million project debt facility
South African
JIBAR + 2.50% 31 May 2027 534 –
1 575 2 704
ZAR12.8 million (US$0.8 million) Asset-Based Finance facility
In January 2019, the Group, through its subsidiary, Gem Diamond Technical Services, entered into a ZAR12.8 million
(US$0.8 million) Asset-Based Finance (ABF) facility with Nedbank Limited for the purchase of a mobile X-Ray transmission
machine (the asset). On 15 July 2022, the facility was early settled. The facility had an interest rate of the South African Prime
Lending Rate, which was 10.5% at 31 December 2022 (31 December 2021: 7.25%).
Total interest for the year on this interest-bearing ABF was US$13.3 thousand (31 December 2021: US$34 thousand).
LSL450.0 million and ZAR300.0 million (US$44.1 million) bank loan facility at Letšeng Diamonds
The Group, through its subsidiary Letšeng Diamonds, has a LSL450.0 million and ZAR300.0 million (US$44.1 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 is secured (31 December 2021: unsecured) and 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 3.25% and the ZAR300.0 million facility
is subject to South African JIBAR plus 3.05%. There was no draw down on this facility at the current or prior year ends.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
190
17. INTEREST-BEARING LOANS AND BORROWINGS (continued)
LSL450.0 million and ZAR300.0 million (US$44.1 million) bank loan facility at Letšeng Diamonds
(continued)
The remaining balance of the credit underwriting fees of US$0.3 million (31 December 2021: US$0.5 million) which were incurred
and capitalised to the Group’s consolidated interest-bearing loans and borrowings as part of the prior year refinancing facility,
albeit that Letšeng did not have any draw downs on its RCF at year end. The capitalised fees are amortised and accounted for as
finance costs within profit or loss over the period of the facility.
US$30.0 million bank loan facility at Gem Diamonds Limited
This facility is a secured (31 December 2021: unsecured) 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.
At year end the facility was undrawn (31 December 2021: US$9.0 million) resulting in US$30.0 million (31 December 2021:
US$21.0 million) being available for draw down. The remaining balance of the previously capitalised credit underwriting fees is
US$0.2 million (31 December 2021: US$0.3 million) at year end. The capitalised fees will be amortised and accounted for as
finance costs within profit or loss over the period of the facility.
The US$-based interest rate for this facility at 31 December 2022 was 8.7% (31 December 2021: 6.72%) which comprises term US$
three-month LIBOR plus 5.00% (31 December 2021: US$ three-month LIBOR plus 6.50%). The decrease in the margin of 6.50% to
5.00% follows the security implementation on 15 March 2022. As part of the Group's refinancing programme, on 30 November
2022, the contractual terms of this LIBOR linked facility transitioned from the US$ three-month LIBOR rate to term Secured
Overnight Financing Rate (SOFR), effective on all interest periods from 1 January 2023. The transition from LIBOR to SOFR had no
impact on the Group financial statements as the transition is as a direct consequence of the IBOR reform and the new basis for
determining the contractual cash flows is and will be economically equivalent to the basis immediately preceding the change
and therefore the Group applied the practical expedient available within the IBOR Phase 2 amendments and changed the basis
for determining the contractual cash flows prospectively from 1 January 2023 by revising the effective interest rate.
Total interest for the year on this interest-bearing RCF was US$1.1 million (31 December 2021: US$1.0 million).
LSL136.4million (US$8.0 million) project debt facility at Letšeng Diamonds
The loan is an unsecured project debt facility which was signed jointly with Nedbank and the ECIC on 29 November 2022 to fund
the replacement of the primary crushing area (PCA) at Letšeng. The loan is repayable in equal quarterly payments commencing
in November 2023. The outstanding balance at year end was ZAR92.8 million (US$5.4 million). This loan expires on 27 May 2027.
The South African rand-based interest rates for the facility at 31 December 2022 was 9.76% which comprises JIBAR plus 2.50%.
Total interest for the year on this interest-bearing loan was US$15.6 thousand.
LSL7.3 million (US$ 0.4 million) insurance premium finance
In the prior year, the Group through its subsidiary Letšeng Diamonds, entered into a LSL7.3million (US$0.4 million) 9-month
funding agreement with Premium Finance Partners (Proprietary) Limited for insurance premium finance for its annual Asset All
Risk insurance premium. In the prior year, all respective insurance premiums prepaid were ceded in favour of Premium Finance
Partners (Proprietary) Limited. Refer Note 12, Receivables and other assets This financing was fully repaid on 1 June 2022.
ZAR3.5 million (US$ 0.2 million) insurance premium finance
In the prior year, the Group through its subsidiary Gem Diamonds Technical Services, entered into a ZAR3.5 million (US$0.2
million) 10-month funding agreement with Premium Finance Partners (Proprietary) Limited for its annual Group Umbrella
Liability insurance premium. In the prior year, all respective insurance premiums prepaid were ceded in favour of Premium
Finance Partners (Proprietary) Limited. . This financing was fully repaid on 1 June 2022.
LSL20.0 million (US$ 1.2 million) insurance premium finance for Multi-aggregate Protection
Insurance Policy
In the prior year, the Group through its subsidiary Letšeng Diamonds, entered into a LSL20.0 million (US$1.2 million) 10-month
funding agreement with Premium Finance Partners (Proprietary) Limited to finance the initial premium of LSL20.0 million on the
Multi-aggregate Insurance Policy. In the prior year, all respective insurance premiums prepaid were ceded in favour of Premium
Finance Partners (Proprietary) Limited. Refer Note 12, Receivables and other assets. This financing was fully repaid on 1 June
2022.
LSL30.0 million (US$ 1.8 million) insurance premium finance for Multi-aggregate Protection
Insurance Policy
The Group through its subsidiary Letšeng Diamonds, entered into a LSL30.0 million (US$1.8 million) 10-month funding
agreement with Premium Finance Partners (Proprietary) Limited to finance the second premium of LSL30.0 million on the Multi-
aggregate Insurance Policy. At year end LSL12.4 million (US$0.7 million) remains outstanding. The funding is repayable in 10
monthly instalments, payable in advance. Total interest on this funding is LSL1.1 million (US$62.6 thousand) of which LSL0.9
million (US$53.1 thousand) was paid during the year. The unutilised premium paid, recognised as an insurance asset, has been
ceded as security in favour of Premium Finance Partners (Proprietary) Limited. Refer Note 12, Receivables and other assets.
Presenting the Gem
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17. INTEREST-BEARING LOANS AND BORROWINGS (continued)
LSL10.9 million (US$ 0.7 million) insurance premium finance
The Group through its subsidiary Letšeng Diamonds, entered into a LSL10.9 million (US$0.6 million) 10-month funding
agreement with Premium Finance Partners (Proprietary) Limited for insurance premium finance for its annual Asset All Risk
insurance premium. At year end LSL4.5million (US$0.3 million) remains outstanding. The funding is repayable in 10 monthly
instalments, payable in advance. Total interest on this funding is LSL0.4 million (US$23.7 thousand) of which LSL0.3 million
(US$19.4 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.
Other facilities
Letšeng Diamonds has a ZAR100.0 million (US$5.9 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 in the current
or prior years.
The bank loan facilities include an additional US$20.0 million accordion option for Gem Diamonds, the utilisation of which is
subject to all necessary internal credit and other approvals from all funders. There was no utilisation of this facility in the current
or prior years.
2022 2021
US$’000 US$’000
18. LEASE LIABILITIES
Non-current 6 021 3 851
Current 1 877 973
Total lease liabilities 7 898 4 824
Reconciliation of movement in lease liabilities
As at 1 January 4 824 6 738
Additions 5 287 507
Interest expense 666 525
Lease payments (2 512) (2 185)
Derecognition of lease – (352)
Foreign exchange differences (367) (409)
As at 31 December 7 898 4 824
Lease payments comprise payments in principle of US$1.8 million (31 December 2021: US$1.7 million) and repayments of
interest of US$0.7 million (31 December 2021: US$0.5 million).
During the year, the Group recognised variable lease payments of US$39.5 million (31 December 2021: US$50.0 million), which
consist of mining activities outsourced to a mining contractor. Total costs incurred for the year amount to US$39.5 million (31
December 2021: US$50.0 million) of which US$28.4 million (31 December 2021: US$41.5 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 and Note 4, Operating profit.
During the year, a new lease contract for backup power generating equipment at Letšeng was entered into. This lease contains
residual value guarantees of US$42 thousand (31 December 2021: nil) which represents the cost to decommission and return the
power generating equipment to the supplier at the end of the lease term. Refer Note 9, Right-of-use assets for details on new
leases entered into and leases derecognised during the year.
The Group incurred rental expenses from short-term leases of US$62 thousand (31 December 2021: nil) during the year.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
192
2022 2021
US$’000 US$’000
19. TRADE AND OTHER PAYABLES
Non-current
Severance pay benefits
1
2 169 2 095
Current
Trade payables
2
10 888 10 778
Accrued expenses
2
5 884 5 413
Leave benefits 625 639
Royalties
2
1 936 4 996
Withholding taxes
2
230 341
Other 145 21
19 708 22 188
1 The severance pay benefits arise due to legislation within the Lesotho jurisdiction, requiring that two weeks of severance pay be provided for every completed year of service, payable
on retirement.
2 These amounts are mainly non-interest bearing and are settled in accordance with terms agreed between the parties.
Royalties consist of a levy payable to the Government of the Kingdom of Lesotho on the value of diamonds sold by Letšeng.
Withholding taxes mainly consist of taxes payable on dividends and other services to the Lesotho Revenue Authority.
The carrying amounts above approximate fair value.
2022 2021
US$’000 US$’000
20. INCOME TAX (RECEIVABLE)/PAYABLE
Reconciliation of movement in income tax (receivable)/payable
As at 1 January (1 191) 11 834
Payments made during the year (8 435) (23 329)
Refunds received during the year 1 187 96
Income tax charge 6 054 10 197
Foreign exchange differences 117 11
As at 31 December
(2 268) (1 191)
Split as follows
Income tax receivable (2 323) (1 232)
Income tax payable 55 41
2022 2021
US$’000 US$’000
21. PROVISIONS
Rehabilitation provisions 15 387 11 202
Reconciliation of movement in rehabilitation provisions
As at 1 January - Letšeng 11 202 12 331
Additions - Ghaghoo (Note 15) 3 654 –
Decrease in provision - Ghaghoo (573) –
Other movements - Letšeng 858 (1 345)
Unwinding of discount rate 1 284 1 187
Foreign exchange differences (1 038) (971)
As at 31 December
15 387 11 202
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Gem Diamonds Limited Annual Report and Accounts 193
21. PROVISIONS (continued)
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 estimated
rehabilitation period at the mining operations. The pre-tax discount rates are adjusted annually and reflect current market
assessments.
In determining the amounts attributable to the rehabilitation provision at Letšeng, management used a discount rate of 11.5%
(31 December 2021: 9.8%), estimated rehabilitation timing of 13 years (31 December 2021: 14 years) and an inflation rate of 7.0%
(31 December 2021: 5.3%). The increase 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.
At Ghaghoo, which continued its care and maintenance state, an independent rehabilitation assessment was performed during
the year based on the rehabilitation costs of certain areas of the mine which are expected to be rehabilitated. It is anticipated
that certain infrastructure, such as access roads to the mine, paving and walkways, will remain intact for use by the local
communities and other government departments in the area.
In determining the amounts attributable to the rehabilitation provision at Ghaghoo, management used a discount rate of 6.0%
(31 December 2021: 6.0%), estimated rehabilitation timing of 5 years (31 December 2021: 5 years) and an inflation rate of 4.8%
(31 December 2021: 4.0%). The decrease in the provision at Ghaghoo is mainly attributable to the reduced rehabilitation required
caused by the access road exclusion and a change in method of rehabilitating the processing waste deposit and evaporation
dams, together with the ongoing rehabilitation spend during the year.
2022 2021
US$’000 US$’000
22. DEFERRED TAXATION
Deferred tax assets
Lease liabilities 1 590 1 225
Accrued leave 412 321
Provisions
3 992
3 571
5 994 5 117
Deferred tax liabilities
Property plant and equipment (79 021) (78 202)
Right of use assets (1 347) (900)
Prepayments (84) (188)
Unremitted earnings (1 578) (3 182)
(82 030) (82 472)
Net deferred tax liability (76 036) (77 355)
Reconciliation of net deferred tax liability
As at 1 January (77 355) (78 192)
Movement in current period:
- Accelerated depreciation for tax purposes (5 321) (4 249)
- Accrued leave 4 (2)
- Unremitted earnings 1 604 –
- Prepayments 102 30
- Provisions 779 (429)
- Lease liabilities 459 (350)
- Right-of-use assets
(494)
273
- Foreign exchange differences 4 186 5 564
As at 31 December
(76 036) (77 355)
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$134.3 million (31 December 2021: US$99.5 million). The deferred tax
liability on unremitted earnings is based on the timing of expected dividends from the Group’s subsidiaries over the next three
years. There are no income tax consequences attached to the payment of dividends by Gem Diamonds Limited to its
shareholders.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
194
22. DEFERRED TAXATION (continued)
The Group, excluding Gem Diamonds Botswana, has estimated tax losses of US$47.6 million (31 December 2021: US$40.3
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 does not foresee any taxable profits or taxable temporary differences against which to utilise these.
Gem Diamonds Botswana has estimated tax losses of US$175.8 million (31 December 2021: US$173.0 million), which carry no
expiry date, for which no deferred tax asset has been recognised.
2022 2021
Notes US$’000 US$’000
23. CASH FLOW NOTES
23.1 Cash generated by operations
Profit before tax for the year 30 432 42 915
Adjustments for:
Depreciation and amortisation excluding waste stripping 6 588 6 927
Depreciation on right-of-use assets 4, 9 1 818 1 685
Waste stripping cost amortised 4 36 285 46 813
Finance income 5 (413) (202)
Finance costs 5 4 502 4 165
Unrealised foreign exchange differences (1 911) (2 426)
Profit on disposal and scrapping of property, plant and equipment 3 (195) (16)
Gain on derecognition of leases – (107)
Write-down of inventories to net realisable value 1 556 1 455
Bonus, leave and severance provisions raised 3 182 2 284
Share-based payments 253 397
Impairment of assets 4, 15 702 –
Bad debts written off – 12
82 799 103 902
23.2 Working capital adjustment
Increase in inventory (3 747) (8 255)
(Increase)/decrease in receivables (1 465) 5 072
Decrease in payables (4 677) (3 924)
(9 889) (7 107)
23.3
Cash flows from financing activities (excluding
lease liabilities)
As at 1 January 11 044 16 087
Net cash used in financing activities
(7 734) (7 194)
– Financial liabilities repaid (17 627) (26 393)
– Financial liabilities raised 9 893 19 199
Interest paid (2 263) (1 927)
Non-cash movements
4 898 4 078
– Interest accrued 2 263 1 927
– Amortisation/unwinding of facility rolling fees 284 300
– Financial liabilities raised
1
2 654 2 082
– Foreign exchange differences (303) (231)
As at 31 December 17 5 945 11 044
1
This amount mainly relates to funding obtained for insurance premium finance. The funding was paid directly by the lender to the third party and is being repaid by the Group in
monthly instalments to the lender. Refer Note 17, Interest-bearing loans and borrowings.
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Gem Diamonds Limited Annual Report and Accounts 195
2022 2021
US$’000 US$’000
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 187 145
– After one year but not more than five years 847 760
– More than five years 809 784
1 843
1 689
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 32 645 39 290
– After one year but not more than five years 32 514 89 241
65 159 128 531
Multi-aggregate protection policy
During the prior year, the Group, through its subsidiary Letšeng entered into a LSL100.0
million (US$5.9 million) Multi-aggregate Protection Insurance Policy with the Lesotho
National Insurance Group (LNIGC). The policy has a tenure of 4 years and 9 months and
consists of five premium payments each payable annually in advance.
On 1 August 2022 the policy was increased to LSL140.0 million (US$8.2 million) and the
premium payments were increased to LSL30.0 million (US$1.8 million) for the remainder of
the policy. As at 31 December 2022 the Group has committed to settle the three remaining
premium payments, as well as the annual insurance risk finance service fee of 7% of the
annual premium 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 there is 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 1 763 1 253
– After one year but not more than five years 3 526 3 759
5 289
5 012
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 68 54
– After one year but not more than five years 103 64
171 118
Capital expenditure
Approved but not contracted for 8 676 19 335
Approved and contracted for 5 999 855
14 675 20 190
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
196
24. COMMITMENTS AND CONTINGENCIES (continued)
The main capital expenditure approved relates to the Underground Feasibility Study of US$4.5 million and the balance of the
investment in the new PCA at Letšeng of US$2.6 million (31 December 2021: US$15.0 million). Other smaller capital expenditure,
all at Letšeng, relates to the construction of a bioremediation plant of US$1.6 million, investment in continued tailings storage
extension of US$1.1 million (31 December 2021: US$1.3 million) and the replacement of the Plant 1 scrubber of US$1.0 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% (2021: 39.5% to 60%) of the value (after costs) of the diamonds recovered by
Alluvial Ventures and is limited to US$1.4 million (2021: US$1.4 million) per individual diamond. The Alluvial Ventures contract
expired at the end of June 2022 and all liabilities settled. There was therefore no contingent rental at the reporting date.
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$0.3 million (December 2021: US$0.2 million) relating mainly to labour
matters.
The Group monitors possible tax claims within the various jurisdictions in which the Group operates. Management applies
judgement in identifying uncertainties over tax treatments and concluded that there were no uncertain tax treatments relating
to the current year. Refer Note 1.2.28, Critical accounting estimates and judgements. There remains a risk that further tax
liabilities may potentially arise. While it is difficult to predict the ultimate outcome in some cases, the Group does not anticipate
that there will be any material impact on the Group’s results, financial position or liquidity.
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25. RELATED PARTIES
Related party
Relationship
Jemax Management (Proprietary) Limited
Common director
Government of the Kingdom of Lesotho
Non-controlling interest
Refer Note 1.1.2, Operational information, for information regarding shareholding in subsidiaries.
2022 2021
US$’000 US$’000
Compensation to key management personnel (including Directors)
Share-based equity transactions 204 248
Short-term employee benefits 3 874 4 500
Post-employment benefits (including severance pay and pension) 203 152
4 281 4 900
Fees paid to related parties
Jemax Management (Proprietary) Limited (84) (93)
Royalties paid to related parties
Government of the Kingdom of Lesotho (18 869) (20 214)
Lease and licence payments to related parties
Government of the Kingdom of Lesotho (38) (70)
Sales to/(purchases from) related parties
Jemax Management (Proprietary) Limited (5) (6)
Non-executive director – 11
Amount included in trade payables owing to related parties
Jemax Management (Proprietary) Limited (7) (8)
Amounts owing to related party
Government of the Kingdom of Lesotho (2 163) (5 337)
Dividends declared
Government of the Kingdom of Lesotho (10 549) (3 890)
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 in the prior year was for the sale of a polished diamond. All proceeds were
received prior to the previous 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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
198
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, buy back its 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 2022, the Group had US$82.6 million (31 December 2021: US$74.3 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 within 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.
(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 all its 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 2022 and 31 December 2021.
There has been no change in the assumptions or method applied from the prior year.
Sensitivity analysis
At year-end, Letšeng had only US$40.4 thousand (2021: US$22.1 million) cash on hand held in US$. If the US dollar had
appreciated/(depreciated) by 10% against the LSL, the Group’s profit before tax and equity at 31 December 2022 would have
been US$3.4 thousand higher/(lower) (31 December 2021: US$2.4 million).
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26. FINANCIAL RISK MANAGEMENT (continued)
Capital management (continued)
a) Market risk (continued)
(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 2022, the Group had
no forward exchange contracts outstanding (31 December 2021: 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 100 basis points (2021: 80 basis
points) during the year, profit before tax and equity would have been US$0.1 million (lower)/higher 31 December 2021: US$0.1
million). The assumed movement in basis points is based on the currently observable market environment, with eased COVID-19
impact, which has increased interest rates compared to the prior year, and also assumed a continued impact on rising interest
rates caused by the Russian invasion of Ukraine.
(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 2022 and
31 December 2021 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 and 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 undrawn debt
facilities of US$82.6 million at year end (2021: US$74.3 million).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
200
26. FINANCIAL RISK MANAGEMENT (continued)
Capital management (continued)
(c) Liquidity risk (continued)
The table below summarises the maturity profile of the Group’s financial liabilities at 31 December based on contractual
undiscounted payments. The prior period excludes the liabilities directly associated with assets held for sale:
2022 2021
US$’000 US$’000
Floating interest rates
Interest-bearing loans and borrowings
– Within one year 2 317 2 758
– After one year but not more than five years 8 805 8 856
Total
11 122 11 614
Lease liabilities
– Within one year 2 332 1 459
– After one year but not more than five years 6 161 4 282
– After five years 448 -
Total
8 941 5 741
Trade and other payables
– Within one year 19 708 22 188
– After one year but not more than five years 2 169 2 095
Total
21 877 24 283
2022 2021*
US$’000 US$’000
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 253 397
*The prior year figures have been re-presented, as Gem Diamonds Botswana (Proprietary) Limited (Ghaghoo Diamond Mine) ceased to be classified as a discontinued operation during
the current financial reporting period. Refer Note 15, Assets held for sale.
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 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.
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27. SHARE-BASED PAYMENTS (continued)
LTIP 2007 Award
Under the 2007 LTIP rules, there are three awards where options are still outstanding.
All these 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 (ie 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 (ie 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.
The following table reflects details of all the awards within the 2007 LTIP that remain outstanding:
LTIP LTIP LTIP
March April March
2016 2015 2014
Number of options granted – Nil value
1 215 000 1 215 000 625 000
Number of options granted – Market value
185 000 185 000 -
Date exercisable 15 March 2019 1 April 2018 19 March 2017
Options outstanding 34 287 5 000 5 000
Dividend yield (%) 2.00 2.00 -
Expected volatility (%)
1
39.71 37.18 -
Risk-free interest rate (%)
2
0.97 1.16 -
Expected life of option (years) 3.00 3.00 3.00
Exercise price (US$) nil nil nil
Exercise price (GBP) nil nil nil
Weighted average share price (US$) 1.56 2.10 2.87
Fair value of nil value options (US$) 1.40 1.97 2.87
Fair value of nil value options (GBP) 0.99 1.33 1.74
Fair value of market value options (US$) 0.69 1.18 -
Fair value of market value options (GBP) 0.49 0.80 -
Model used Monte Carlo Monte Carlo -
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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
202
27. SHARE-BASED PAYMENTS (continued)
LTIP 2017 Award
Under the 2017 LTIP rules, there are five awards where options are still outstanding.
All the awards were issued on the same basis as the 2007 LTIP.
LTIP 2017 Award – April 2022
On 4 April, 165 930 nil-cost options were granted to certain key employees of the Company. In addition, 841 168 nil-cost options
were granted to certain executive employees and the Executive Directors on the same basis as the 2007 LTIP. These options were
granted in line with the introduction of the Gem Diamonds Incentive Plan (GDIP) in the prior year, which integrates annual bonus
awards with awards under the LTIP. The options, which vest in tranches of one-third per annum commencing on 4 April 2023, are
exercisable between the respective vesting dates and 3 April 2032. The fair value of these awards is based on the observable Gem
Diamonds Limited share price on the date of award with no adjustments to the price made.
This new award was made under predominantly the same basis as the 2007 LTIP, with the following differences:
To key employees (excluding Executive Directors):
• the number of awards granted are determined on the Group’s performance in the preceding financial year in terms of the Gem
Diamonds Incentive Plan (GDIP) introduced in 2021;
• the vesting of the award is dependent only on service conditions. There are no future performance conditions attached to the
award;
• if the service conditions are not met, the options lapse;
• the fair value of the awards is based on the observable Gem Diamonds Limited share price on the date of award with no
adjustments to the price made; and
• the awards are subject to malus and clawback.
To Executive Directors as a bonus share award:
• the number of awards granted are determined on the Group’s performance in the preceding financial year in terms of the Gem
Diamonds Incentive Plan (GDIP) introduced in 2021;
• the vesting of the award is dependent only on service conditions. There are no future performance conditions attached to the
award;
• if the service conditions are not met, the options lapse;
• the fair value of the awards is based on the observable Gem Diamonds Limited share price on the date of award with no
adjustments to the price made;
• the awards have a two-year holding period from the respective vesting dates and are exercisable for 10 years from the award
date; and
• the awards are subject to malus and clawback.
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27. SHARE-BASED PAYMENTS (continued)
LTIP 2017 Award - April 2022 (continued)
The following table reflects details of all the awards within the 2017 LTIP that remain outstanding:
LTIP LTIP LTIP LTIP LTIP
April June March March July
2022 2020 2019 2018 2017
Number of options granted –
Nil value
1 007 098 1 069 000 1 160 500 1 265 000 1 150 000
Number of options granted –
Market value
- 180 000 142 500 185 000 185 000
Date exercisable 4 April 2023 9 June 2023 20 March 2022 20 March 2021 4 July 2020
Options outstanding 994 308 1 023 061 278 679 249 799 58 642
Dividend yield (%) - - - - 2.00
Expected volatility (%)
1
n/a 47.00 43.00 40.00 40.21
Risk-free interest rate (%)
2
n/a 0.34 1.20 1.20 0.67
Expected life of option (years) 3.00 3.00 3.00 3.00 3.00
Exercise price (US$) nil nil nil nil nil
Exercise price (GBP) nil nil nil nil nil
Weighted average share price
(US$) 0.74 0.39 1.20 1.35 1.24
Fair value of nil value options
(US$) 0.74 0.39 1.20 1.35 1.11
Fair value of nil value options
(GBP) 0.58 0.31 0.90 0.96 0.86
Fair value of market value options
(US$) - 0.19 0.58 0.74 0.72
Fair value of market value options
(GBP) - 0.15 0.44 0.53 0.56
Model used
n/a Monte Carlo Monte Carlo Monte Carlo Monte Carlo
1
Expected volatility was based on the average annual historic volatility of the Company’s share price over the previous three years.
2
The relevant risk-free interest rate is taken from a UK Treasury Bond issued which closely matches the lifetime of the option.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
204
27. SHARE-BASED PAYMENTS (continued)
LTIP 2017 Award - April 2022 (continued)
The following table illustrates the number (’000) and movement in the outstanding share options during the year:
2022 2021
US$’000 US$’000
Outstanding as at 1 January 2 453 3 887
Granted during the year 1 007 -
Exercised during the year
1
(394) (855)
Forfeited (418) (579)
As at 31 December
2 648 2 453
Exercisable as at 31 December
635 454
1 Options were exercised regularly throughout the year. The weighted average share price during the year was £0.45 (US$0.55) (2021: £0.60 (US$0.83)).
The weighted average remaining contractual life for the share options outstanding as at 31 December 2022 was 7.6 years
(2021: 7.5 years).
The weighted average fair value of the share options outstanding as at 31 December 2022 was US$0.48 (2021: US$0.65).
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 2022 was £0.33 (US$0.39) (2021: £0.47 (US$0.65)). The shares outstanding at the end of the
year are as follows:
2022 2021
US$’000 US$’000
Outstanding as at 1 January 10 17
Exercised during the year - (7)
As at 31 December
10 10
Exercisable as at 31 December
10 10
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28. FINANCIAL INSTRUMENTS
Set out below is an overview of financial instruments, other than the current portions of the prepayment disclosed in Note 12,
Receivables and other assets, which do not meet the criteria of a financial asset.
2022 2021
Notes US$’000 US$’000
Financial assets at amortised cost
Cash 14 8 721 30 913
Cash – assets held for sale 15 - 144
Receivables and other assets 12 6 421 4 398
Receivables and other assets – assets held for sale 15 - 45
Total
15 142 35 500
Total non-current
2 916 1 278
Total current
12 226 34 222
Financial liabilities at amortised cost
Interest-bearing loans and borrowings 17 5 945 11 044
Trade and other payables 19 21 877 24 279
Trade and other payables – liabilities directly associated with assets held for sale 15 - 446
Total
27 822 35 769
Total non-current
6 539 10 435
Total current
21 283 25 334
The carrying amounts of the Group’s financial instruments held approximate their fair value.
There were no open hedges at year end (2021: nil).
2022 2021
US$’000 US$’000
29. DIVIDENDS DECLARED AND PROPOSED
Declared dividends on ordinary shares
Final ordinary cash dividend for 2021: 2.7 US cents per share (2020: 2.5 US cents per
share)
3 771 3 509
The 2021 proposed dividend was approved on 8 June 2022 and a final cash dividend of 2.7 US cents per share was paid to
shareholders on 21 June 2022.
The 2020 proposed dividend was approved on 2 June 2021 and a final cash dividend of 2.5 US cents per share was paid to
shareholders on 15 June 2021.
30. EVENTS AFTER THE REPORTING PERIOD
No other fact or circumstance has taken place between the end of the reporting period and the approval of the financial
statements which, in our opinion, is of significance in assessing the state of the Group’s affairs or requires adjustments or
disclosures.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
206
31. MATERIAL PARTLY OWNED SUBSIDIARY
Financial information of Letšeng Diamonds, a 70% held subsidiary which has a material non-controlling interest, with the
remaining 30% being held by the Government of the Kingdom of Lesotho, is provided below.
2022 2021
US$’000 US$’000
Name
Country of
incorporation
and
operation
Letšeng Diamonds (Proprietary) Limited
Lesotho
Accumulated balances of material non-controlling interest 69 822 76 845
Profit allocated to material non-controlling interest 9 786 12 458
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 186 087 198 510
Cost of sales (123 793) (120 751)
Gross profit
62 294 77 759
Royalties and selling costs (19 571) (20 879)
Other income 2 133 1 110
Operating profit
44 856 57 990
Net finance costs (2 590) (2 470)
Profit before tax
42 266 55 520
Income tax expense (9 647) (13 993)
Profit for the year
32 619 41 527
Total comprehensive income
32 619 41 527
Attributable to non-controlling interest 9 786 12 458
Dividends paid to non-controlling interest (10 549) (6 685)
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 317 550 313 028
Current assets
Inventories, receivables and other assets, and cash and short-term deposits 39 231 61 455
Total assets
356 781 374 483
Non-current liabilities
Interest-bearing loans and borrowings, trade and other payables, provisions,
lease liabilities and deferred tax liabilities 104 118 95 261
Current liabilities
Interest-bearing loans and borrowings, trade and other payables and lease
liabilities 19 923 23 072
Total liabilities
124 041 118 333
Total equity
232 740 256 150
Attributable to:
Equity holders of parent 162 918 179 305
Non-controlling interest 69 822 76 845
Summarised cash flow information for the year ended 31 December
Operating cash inflows 74 793 77 824
Investing cash outflows (59 928) (68 655)
Financing cash outflows (36 387) (30 582)
Foreign exchange differences (475) 1 271
Net decrease in cash and cash equivalents
(21 997) (20 142)
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Gem Diamonds Limited Annual Report and Accounts 207
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 2022 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 2022 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 (ie
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 2022.
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 2022.
Signature, discovery, and production bonuses
There were no payments of this nature to governments for the year ended 31 December 2022.
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 2022.
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Cash flow basis
Payments reported are on a cash flow basis and may differ to amounts reported in the Gem Diamonds Limited 2022 Annual
Report and Accounts, which are prepared on an accrual basis.
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$103 450 (£86 000), are disclosed in this report. All payments
below this threshold have been excluded.
Reporting currency
The payments to government have been reported in US dollar.
Payments made in currencies other than US dollar were translated at the relevant annual average exchange rate for the year
ended 31 December 2022.
Summary report
Operation Country
Taxes
US$’000
Royalties
US$’000
Licence fee
US$’000
Total
US$’000
Letšeng Diamonds (Proprietary) Limited Lesotho 6 944 21 728 156 28 828
Total 6 944 21 728 156 28 828
Lesotho
Letšeng Diamonds (Proprietary) Limited
Taxes
US$’000
Royalties
US$’000
Licence fee
US$’000
Total
US$’000
Lesotho Revenue Authority 6 944 – – 6 944
Government of the Kingdom of Lesotho – 21 728 156 21 884
Other
Other than the taxes, royalties and licence fees disclosed above, there were no other payments to governments for the year
ended 31 December 2022, but Letšeng Diamonds (Proprietary) Limited (a subsidiary of Gem Diamonds Limited) has a mining
contract (which has been in place since 2006), with Matekane Mining Investment Corporation. This contract is due to expire in
October 2024 under current terms. Letšeng Diamonds (Proprietary) Limited understands that Matekane Mining Investment
Corporation is wholly or majority indirectly owned and controlled by Ntsokoane Samuel Matekane, who became Prime Minister
of the Kingdom of Lesotho in October 2022.
REPORT ON PAYMENTS TO GOVERNMENTS
210
ABBREVIATIONS AND DEFINITIONS
AGM Annual General Meeting IAS International Accounting Standards
AIFR All injury frequency rate ICMM International Council on Mining and Metals
AV Alluvial Ventures (a third-party contractor) IFRS International Financial Reporting Standard
Basotho Lesotho nationals ISO International Organization for
Standardization
BEPS Basic earnings per share IT Information technology
BWP Botswana pula JIBAR Johannesburg Interbank Agreed Rate
CAGR Compound annual growth rate KPI Key Performance Indicator
CCSA Climate Change Scenario Analysis LIBOR London Interbank Offered Rate
CDP Carbon Disclosure Project LoM Life of mine
CEO Chief Executive Officer LSL Lesotho loti
CFO Chief Financial Officer LTI Lost time injury
CLO Community Liaison Officer LTIFR Lost time injury frequency rate
CO
2
e Carbon dioxide equivalent LTIP Long-term incentive plan
COO Chief Operating Officer MRM Mineral Resource Management
cpht Carats per hundred tonnes Net cash/ (debt) The sum of cash and cash equivalents less
drawn down bank facilities (excluding asset-
based finance facility and insurance
premium financing)
CSI Corporate social investment NGO Non-governmental organisation
CSR Corporate social responsibility PAC Project-affected community
CSRI Corporate social responsibility investment PCA Primary crushing area
DTR Disclosure Guidance and Transparency
Rules
RCF Revolving credit facility
EBITDA Earnings before interest, tax, depreciation
and amortisation
SDG Sustainable Development Goal
EDC Energy Decarbonisation Committee SEIA Social and environmental impact assessment
EPS Earnings per share SEMP Social and environmental management plan
ESG Environmental, social and governance SLL Sustainability-linked loan
ESOP Employee Share Option Plan SME
Small and medium enterprise
EU European Union SOFR
Secured overnight financing rate
EY Ernst & Young STIB Short-term incentive bonus
FCA Financial Conduct Authority TCFD Task Force on Climate-related Financial
Disclosures
FPIC Free, Prior and Informed Consent The Board The Gem Diamonds Board of Directors
FRC Financial Reporting Council The Group The Gem Diamonds Company and its
subsidiaries
FTSE Financial Times Stock Exchange TSF Tailings storage facility
GDIP Gem Diamonds Incentive Plan TSR Total shareholder return
GDP Gross domestic product UK United Kingdom
GIA Gemological Institute of America UN United Nations
GISTM Global Industry Standard on Tailings
Management
UNGC United Nations Global Compact
GRI Global Reporting Initiative US$ United States dollar
ha Hectare USA/US United States of America
HSSE Health, safety, social and environment VAT Value added tax
ADDITIONAL INFORMATION
212
CONTACT DETAILS
AND ADVISERS
FINANCIAL ADVISER
AND SPONSOR
AUDITORS
Registered office JP Morgan Cazenove Limited Ernst & Young Inc.
T: +1 (0) 284 494 9820
Head office
2 Eaton Gate
London SW1W 9BJ
T: +44 (0) 203 043 0280
F: +44 (0) 203 043 0281
LEGAL ADVISER FINANCIAL ADVISER FINANCIAL PUBLIC
RELATIONS ADVISER
Linklaters Panmure Gordon & Co. Celicourt Communications
Limited
One Silk Street One New Change Orion House
London EC2Y 8HQ London EC4M 9AF 5 Upper St Martin’s Lane
United Kingdom United Kingdom London WC2H 9EA
T: +44 (0) 20 7456 2000 T: +44 20 7886 2500 United Kingdom
F: +44 (0) 20 7456 2222 T: +44 (0) 20 8434 2643
FEEDBACK
Gem Diamonds Limited
Glenn Turner
T: +44 (0) 203 043 0280
E: IR@gemdiamonds.com
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DIRECTORS’ AND EXECUTIVE
MANAGEMENT CVS
NON-EXECUTIVE DIRECTORS
Harry Kenyon-Slaney (62)
Non-Executive Chairperson
BSc Geology (Southampton University),
International Executive Programme (INSEAD
France)
Chairperson tenure <9 years
No independence conflict exists
Appointed to the Board in June 2017
Skills and experience
Harry has over 40 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.
Michael Lynch-Bell (69)
Non-Executive Director
BA Hons Economics and Accountancy
(University of Sheffield); FCA of the Institute of
Chartered Accountants in England and Wales
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.
ADDITIONAL INFORMATION
214
Rosalind Kainyah MBE (65)
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
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.
Mike Brown (62)
Non-Executive Director
BSc Engineering; Mining PR Eng (ECSA)
Engineering (University of Witwatersrand);
Strategic Executive Programme (London
Business School)
Appointed to the Board in January 2018
Skills and experience
Mike has over 38 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.
Mazvi Maharasoa (53)
Non-Executive Director
BLLM International and Commercial Law
(University of Buckingham)
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 the Chairperson of First National Bank Lesotho Limited and a
non-Executive Director of several private companies.
Presenting the Gem
Diamonds Annual Report
and Accounts 2022
Strategic
report
Performance
review Governance
Directors’
report
Financial
statements
Report on
payments to
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Additional
information
Gem Diamonds Limited Annual Report and Accounts 215
EXECUTIVE DIRECTORS
Clifford Elphick (62)
Chief Executive Officer
BCom (University of Cape Town);
BCompt Hons (University of South Africa)
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.
Michael Michael (52)
Chief Financial Officer
BCom Hons (Rand Afrikaans University);
CA(SA)
Appointed to the Board in April 2013
Skills and experience
Michael has over 23 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 22 April 2013 he was promoted to the
position of Chief Financial Officer and appointed to the Board.
Current external appointments
None
ADDITIONAL INFORMATION
216
EXECUTIVE MANAGEMENT
Glenn Turner (62)
Chief Legal and Commercial
Officer and Company Secretary
BA; LLB (University of Cape Town);
LLM (Cambridge)
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.
Brandon de Bruin (51)
Chief Operating Officer
BCom; LLB (University of the Witwatersrand)
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
Jaco Houman (48)
Senior Manager: Technical and
Projects
B.Eng(Met) (University of Pretoria); MBA
(University of Witwatersrand Business School)
Skills and experience
Jaco joined Gem Diamonds in 2016. His technical and managerial career spans
more than 26 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
Presenting the Gem
Diamonds Annual Report
and Accounts 2022
Strategic
report
Performance
review Governance
Directors’
report
Financial
statements
Report on
payments to
governments
Additional
information
Gem Diamonds Limited Annual Report and Accounts 217
Kiki Constantopoulos (43)
Group Financial Controller
BCom Hons (University of the Witwatersrand);
CA(SA)
Skills and experience
Kiki has 17 years experience in accounting, reporting and financial
management. Following her qualification as a Chartered Accountant she spent
three years as a financial manager at Dunns Clothing & Accessories (a
subsidiary of Pepkor, a leading retailer in South Africa). In 2010, Kiki joined Gem
Diamonds as Financial Manager, and in 2013 was promoted to Group Financial
Controller. Kiki was the finance lead support to the Business Transformation
Officer from 2017 – 2019. She is responsible for financial and management
accounting across the Group’s operations.
Current external appointments
None
Minelle Zech (48)
Group Human Resources
Executive
BCom HR (Potchefstroom University)
Skills and experience
Minelle joined Gem Diamonds in 2015 as HR manager and was promoted to
Group HR Manager in 2019. She has 20 years of HR experience; 10 years in the
services and mining industries respectively. She was involved in the
restructuring of Avis following its acquisition by Barloworld and has extensive
experience in rationalisation projects in the mining industry. At Gem, Minelle
was the HR lead during its Business Transformation between 2017 and 2019,
responsible for organisational health and driving the culture aspect of the
programme. She most recently implemented LetšGem, an employee
communication app for Gem’s entire workforce. Minelle is responsible for all
people aspects across the Group.
Current external appointments
None
ADDITIONAL INFORMATION
218
DISCLOSURES RELATED TO THE
RECOMMENDATIONS OF THE TCFD
Governance
Disclose the organisation’s governance around climate-related risks and opportunities.
Recommended Disclosure References
Describe the Board's oversight of climate-related
risks and opportunities.
Our Approach to Climate Change, page 4. Our Sustainability Report, pages
8, 11, 23 and 46. Our Annual Report and Accounts 2022, pages 26, 92, 111
and 117. Our website at www.gemdiamonds.com.
Describe management's role in assessing and
managing climate-related risks and opportunities.
Our Approach to Climate Change, pages 1, 4, 6, 8 and 9. Our Sustainability
Report, pages 14, 17, 23, 36 and 46. Our Annual Report and Accounts 2022,
pages 26, 31 and 68. Our website at www.gemdiamonds.com.
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
References
Describe the climate-related risks and
opportunities the organisation has identified over
the short, medium and long term.
Our Approach to Climate Change, pages 6, 7 and 10. Our Sustainability
Report, pages 14, 19 and 20. Our Annual Report and Accounts 2022, pages
28, 32, 68 and 73. Our website at www.gemdiamonds.com.
Describe the impact of climate-related risks and
opportunities on the organisation's businesses,
strategy and financial planning.
Our Approach to Climate Change, pages 1, 6 and 9. Our Sustainability
Report, pages 8, 11, 14, 19, 20, 23 and 36. Our Annual Report and Accounts
2022, pages 14, 23, 28 and 31. Our website at www.gemdiamonds.com.
Describe the resilience of the organisation's
strategy, taking into consideration different
climate-related scenarios, including a 2°C or lower
scenario.
Our Approach to Climate Change, pages 6, 9 and 11. Our Sustainability
Report, pages 14, 19, 20 and 36. Our Annual Report and Accounts 2022,
pages 28, 30, 32, 33, 37, 41, 43, 68, 73 and 74. Our website at
www.gemdiamonds.com.
Risk Management
Disclose how the organisation identifies, assesses and manages climate-related risks.
Recommended Disclosure
References
Describe the organisation's processes for
identifying and assessing climate-related risks.
Our Approach to Climate Change, pages 1 and 9. Our Sustainability Report,
pages 19, 46 and 48. Our Annual Report and Accounts 2022, pages 31, 36,
92 and 113. Our website at www.gemdiamonds.com.
Describe the organisation's processes for
managing climate-related risks.
Our Approach to Climate Change, pages 1, 4, 6, 8, 9 and 11. Our
Sustainability Report, pages 14, 17, 19, 21, 23, 26 and 36. Our Annual Report
and Accounts 2022, pages 31, 33, 36, 41, 68, 71 and 73. Our website at
www.gemdiamonds.com.
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, pages 1, 5, 6, 7, 8, 9 and 11 . Our
Sustainability Report, pages 8, 11, 14, 19, 20, 26 and 37. Our Annual Report
and Accounts 2022, pages 22, 23, 24, 28, 29, 31 and 43. Our website at
www.gemdiamonds.com.
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 References
Disclose the metrics used by the organisation to
assess climate-related risks and opportunities in
line with its strategy and risk management
process.
Our Approach to Climate Change, pages 11, 12 and 13. Our Sustainability
Report, page 14. Our Annual Report and Accounts 2022, pages 6, 33, 34 and
68. Our website at www.gemdiamonds.com.
Disclose Scope 1, Scope 2 and, if appropriate,
Scope 3 carbon emissions, and the related risks.
Our Approach to Climate Change, pages 11, 12 and 13. Our Sustainability
Report, page 14. Our Annual Report and Accounts 2022, page 6, 33, 34, 35
and 68. Our website at www.gemdiamonds.com.
Describe targets used by the organisation to
manage climate-related risks and opportunities
and performance against targets.
Our Approach to Climate Change, pages 11, 12 and 13. Our Sustainability
Report, page 14, 15, 16 and 17. Our Annual Report and Accounts 2022,
pages 33, 34, 35 and 68. Our website at www.gemdiamonds.com.
Presenting the Gem
Diamonds Annual Report
and Accounts 2022
Strategic
report
Performance
review Governance
Directors’
report
Financial
statements
Report on
payments to
governments
Additional
information
Gem Diamonds Limited Annual Report and Accounts 219
