Gem Diamonds Limited (GEMD) Earnings Call Transcript & Summary

Good day, ladies and gentlemen, and welcome to the Gem Diamonds 2021 Annual Results Presentation. [Operator Instructions] Please also note that this event is being recorded. I would now like to turn the conference over to the CEO, Mr. Clifford Elphick. Please go ahead, sir.

Thank you, and good morning, everybody, and thanks for your attendance. If we flick over, Janine, please, to Slide #3, which is the 2021 in review page. Here are the high-level numbers. We'll be talking in detail to constituents of this page. But just in summary, a decent revenue number, good EBITDA. Carats recovered was pleasing, good EPS. We had some difficulties during the year with our safety record, but we managed pleasingly to catch it. We shut down for a day to just focus everybody, and I'm pleased to say that we ended up in a reasonable position. Mike will later on talk about the financial position but good to have cash on the balance sheet. Bottom left-hand corner, the business transformation. This is the last time we will be referring to this. But we had set ourselves a target of achieving $100 million in revenue increase in savings, and I'm pleased to say that we were able to do slightly better than our target. Dollar per carat, we prefer to be over $2,000, but nonetheless, $1,835 average dollar per carat. We are the highest dollar per carat kimberlite mine. And this was a decent result. This meant that we are able to declare a dividend again, slightly better than before but very nice to be able to return capital to our shareholders. Turning over the page to Page 4. As you will see, we released our annual report simultaneously with these results today. And there are three main pillars, strategic priorities the strapline there, unearthing unique possibilities. But these are the three main pillars that we operate under. Extracting maximum value from operations, we are always trying to optimize, maximize our operating model. And those three points there, waste dumping, new fines XRT and adoption of the short-term mine plan within the longer-term framework, is something that we always look at to try and achieve better results. Diamond damage, we spent a lot of time trying to ensure that the plant feed was stable. A lot of work has gone into the data set, which we have derived over the years, analyzing and assessing and looking at when we get our best results. And it's all about stability in the plant. We have been evaluating a number of different technologies with a view to smoothing out what goes to the plant and also to produce a head feed, which will allow us to advance the work which is being done on trying to find a solution to identify diamonds within kimberlite. And that is -- the surface miner trials fall into that bucket of R&D work, which we've done. The surface miner delivered some good results. The particular mine -- surface miner that we had was not fit for purpose. But nevertheless, we found that given the consistency of the feed, we were able to produce an 11% increase in respect of oil pricing through the plant. This has encouraged us to go further. We're using a different provider. And we will be doing the Phase 2 of surface miner trials. And it's delivering interesting results as far as we have modeled so far, and I'm talking about the business transformation in total. Working responsibly and maintaining our social license to operate, vitally important, increasingly important. And a lot of time and effort goes into this. I mentioned the fact that we had to have a particular focus on our safety campaign. That is -- that whole process and planning has matured over the years. And we're proud of our results. But we did have some slippage. And I'm pleased to say that we managed to pull that back. All the stakeholders that we deal with, whether it's the community, whether it's the host government, whether it's the diamond industry per se, all of these different constituents in our industry require significant effort and management and input. And there's a whole team who are responsible for this: me, Glenn Turner, Brandon, Michael Michael, the CEO in-country. So we work hard at this. And I'm pleased to say that we have a long track record now of consistent behavior, consistent performance. And so at this point, things are in relatively good shape. Our CSI investment strategy is always based on the community needs. We did during COVID, during the hard lockdowns of 2020 and 2021. This had fallen behind as far as our normal rate of investment is concerned. And so it's pleasing that we were able to -- as we moved out of the back end of the hard lockdown of COVID, we were able to get this back on to the normal sort of levels of investments and manage this in our normal way. The tailings management is big issue. We have made a very big effort here. We'll talk about that in some detail. And then the UN SDGs, we've done a lot of work there and made significant progress. And again, Brandon will talk in some detail about that. Increasingly, and it's highlighted by the sanctions, which have now been placed on ALROSA's diamonds, increasingly the origins of the diamonds is becoming a factor. And we have got two initiatives that we are working on here. The first is that we have partnered with the GIA, which is the generally accepted and best grading authority in the industry, Gemologists Institute of America. And we have over 500 diamonds, which have been given origin reports. And then this goes with the rough into our sales process and our customers, our clients are really appreciative of this and it really assists them. So we're working hard with that. We also have gone a step further. We're evaluating and participating in a new technology, which is a sort of a fingerprint technology. And we are assessing that. All of this gets put together with a blockchain recordkeeping process. And so I think that all of you will have seen, whether it's De Beers and [indiscernible], the ability to prove exactly where the diamond came from is increasingly important and adds value. As far as the future is concerned, climate change, we are evaluating our position, what we are doing, what we ought to be doing, how we get there. And a lot of work has gone into that. On the debt refinancing, good work was concluded. Michael and his team got that all in decent shape. So happy to say that, that is now all done. We are constantly looking at growth opportunities. And whilst there's no major item to report here, we have raised our aim, and we're looking beyond our territory, beyond Lesotho's borders for deposits, which are well-known, well understood. The diamond content grade value are understood. And so we're assessing a number of things. We're not tasked to pulling any triggers but just to say it's something that we do all the time. We will, in this presentation, speak at some length about the long-term mine planning and optimizing our assets. Various initiatives have meant that we were able to bring more ore into our activities. And that has given us an opportunity to think slightly differently about the long term. And we will talk to you in some detail about that. If we could move on to Slide #5. Let me talk to you about the diamond market. At this point, the Russian invasion of Ukraine seems not to be going according to plan as far as Russia is concerned. And it's likely to be slightly more drawn-out than perhaps was originally planned by the Russians. But the effect of sanctions has meant that ALROSA's goods are not welcome in the market. And you may have seen, whether it's Signet, LV, Tiffany, any of the major buyers of goods are all making a point of telling their supply chains that they're not willing to buy any of ALROSA's goods. Of course, it's likely that ALROSA will sell its goods through China and they -- and some of these goods may well end up back in the market. But the short-term impact, I would imagine, is a significant shortage of goods for a short period of time. As I said, it's likely that those goods may find their way into the market. And given the shortage, there's probably going to be some upward pressure on prices. We are busy selling goods as we speak. End of next week, week thereafter, we will be able to judge the impact on our goods. But in the recent past, there have been strong upward pressure on prices. Nothing else under the global economic backdrop that I want to speak about. You can read it there. On the diamond market, there certainly was very strong demand throughout 2021. And in particular, sales at the end of the year in the sort of Thanksgiving, Christmas, New Year period were extremely strong. And a lot of inventory was cleared up and restocking of those depleted inventory levels happened earlier and is happening. Margins, there was some margin expansion. And I think the diamond market -- I mean, the bottom point I make there, diamond market benefited. Because of COVID lockdowns and difficulty in travel and uncertainty, there was a significant amount of capital which built up, and some of that was spent in the diamond market. And we certainly got the benefit of that. The right-hand column, we have, as you would see, expanded our viewing process into Dubai. This -- Dubai, as you will recall, now welcomed Israeli diamond buyers into Dubai. They're able to travel there easily. And many of the Indian clients prefer to travel to Dubai than they do to Antwerp. So we are seeing a significant extra number of people coming to our viewings by showing the goods in Dubai. We then take them back to Antwerp and complete the sales process there, online bidding. But by having the goods in Dubai, a significant number of extra additional clients, who otherwise wouldn't see the goods, get to see them. And that added competition certainly has assisted us so far. We do look at some of the downstream value options available to us. It's more a current in the water than a conscious strategy. We are looking at possibilities. And indeed, some of the major brands have been discussing supply agreements with us. But just to remind you, we have an obligation to achieve the highest price we can by selling goods on international markets through tenders. That is one of the conditions of our mine operating agreement. And therefore, we need to work with the government to get their approval on any sort of longer-term, medium-term supply agreements. And they are sympathetic to this. But as of now, we haven't inked any agreements. Price recovery continuing into 2022. That certainly was the case in January and February. It's unclear what the impact of the war in the Ukraine is going to have over the medium and longer term. Hopefully, there's no major problem for us. But we shall see in the fullness of time. I'm going to hand over to Brandon to deal with the next few slides.

Thank you, Clifford, and good morning, everyone. Our approach to climate change has been an important focus for the group. And during 2021, we adopted the TCFD recommendations and defined a 3-year road map to full adoption. The ultimate aim is to define and implement an appropriate decarbonization strategy. And in the table below, you can see the 3-year plan resulting in that in Phase 3 in 2023. We have adopted a science-based approach to define and set our decarbonization goals. And in 2021, we completed a climate change scenario analysis. This analysis has identified climate-related risks and opportunities for the group. The table below, as I said, sets out our road map. Phase 1 in 2021, we have completed and met all our targets there. We're now moving to Phase 2 with ultimately defining our decarbonization targets and then moving to Phase 3. And I'm also pleased that the appointment of Rosalind Kainyah has enhanced our Board's ESG skills. And if you flip over to the next slide, so our climate strategy considerations. Climate change has impacts on our strategy, operations and financial planning, is directly linked to our three strategic priorities, being what Clifford has gone through, are: expecting maximum value from operations; working responsibly and maintaining our social license to operate; and preparing for our future. A number of resource efficiency initiatives implemented in 2021 has resulted in not only the reduced fossil fuel consumption but also reduction of carbon emissions and mining-related costs. And we'll touch on this a bit later in terms of a prime example being our reduction of waste haulage distances, which reduced operating costs in line of our priority to maximize value and at the same time, reducing our carbon emissions. The work done -- that we are doing in climate change would ensure that we are able to identify climate change-related risks and effectively and efficiently manage and mitigate these. If we flip over to the next page, moving on to our safety for the year. As Clifford mentioned, we did, in the first half of the year, see a number of increases in incidents and safety incidents. And we are not alone in the industry in this. We saw that across the mining industry and seemed to be an impact of the lag effect of COVID and the impact that has on the workforce. This resulted in our all injury frequency rate increasing slightly from 2020 to 0.93% and pretty much in line with 2019. And although I'm pleased to say that again we had 0 fatalities, it is unfortunate that we suffered 6 LTIs during the year, which again increased our lost time injury frequency rate to 0.24. Following the increase in frequency of incidents that we picked up in H1, as Clifford mentioned, we stopped operations as a Stop for Safety -- following the Stop for Safety campaign and numerous initiatives we implemented coming out of the consultations and meetings with the workforce. And by implementing a number of these initiatives, we were able to mature the safety culture at Letšeng to a level where we saw a marked improvement in H2 and coming into this year. I'm also pleased to report that we had no major significant environmental incidents and no major or significant social incidents. If we can move on to the COVID slide, thank you. Reporting on COVID-19, I think this has been a major success for the group, and in particularly in Letšeng. We were able to manage our way through three waves of COVID during the year: in January, in June, July, August and then again in November. And by implementing our protocols as we had done the year before during the lockdowns and adjusting those appropriately, we were able to continue uninterrupted operations in 2021 in a safe and responsible manner. The major success was the vaccination campaigns that we ran on site, and particularly in Letšeng, in educating our workforce about the vaccines and the benefit of taking them. And I'm very pleased and proud to say that the team did an excellent job there. And we are now 99% fully vaccinated at Letšeng. In continuing to support our communities and our workforce, we donated 20,000 vaccines during the year, a new 4x4 ambulance, 17 oxygen concentrators and also various PPE and food supplies to our communities. We continued with our wide-scale screening and testing. And in 2021 alone, we conducted nearly 31,000 tests, screening our employees and visitors to site and in transport on the way to site. Cost implication per employee has now amounted to LSL 17,000 per employee. And that's in the safety -- COVID-19 safety measures. If we flip to the next slide, I mean, just pause there. This is our dairy project and milk produced from our dairy project, which is one of our CSI projects. And we are proud to say it's running very well, and we have recently visited that a couple of weeks ago. We move over to our CSR overview for 2021. Important work stream this year was the updating of our community needs analyses, which has informed our next 5-year CSR strategy. We've also working pretty hard to ensure that we integrate our adopted 6 UN SDGs. And as Clifford mentioned, in 2021, we were able to catch up, not only complete and implement our 2021 CSR projects but also catch up on 2020 projects that were delayed largely due to COVID restrictions and also due to localized flooding, which had hindered us from getting to our communities with roads being washed away. And in that regard, we were also able to rebuild infrastructure destroyed by those localized floodings. And this included footbridges and roads. We continued with our best practice work throughout the year with the successful trials of our bioremediation plant. And [indiscernible] from these trials, which [indiscernible] was extremely successful. And we're looking to construct a full plant by the end of this year. The safety of our dams is a priority. And as Clifford mentioned, we have aligned ourselves to the Global Industry Standard on Tailings Management for our tailings and storage facilities. And I'm pleased to say that all reports and [indiscernible] that we have got from internal and external consultants have declared our dams safe and well managed and monitored. We are proud that we have retained our ISO 14001 and our ISO 45001 for the seventh consecutive year and also our FTSE4Good status for the third consecutive year. The picture on the right is the -- our egg production project, which was completed early in the year, and a few of the farmers in that region. Moving on to business transformation. Clifford has spoken about this, and just probably to add something important on this target, but we are extremely successful in terms of achieving our target that was set, our 4-year target that was set to end 31st December 2021. And we exceeded the $100 million by achieving over USD 110 million over that period in benefits to the group. Our BT initiatives are embedded. And this is why we did it over a 4-year period. And we'll continue to deliver value as we monitor these consistently and to ensure their sustainability and also implementing some new CI initiatives. You'll see in 2021, our actual benefit from the BT target was $31 million. Moving on to our operations review. Overall, 2021 was a good year but certainly not without its challenges. And the operations faced three waves of COVID-19 during the year, as I've mentioned, extreme weather conditions, including an excessive amount of rain, the most we've seen since I could remember, at Letšeng in particular. Notwithstanding, we were able to continue operations, as mentioned before, in an uninterrupted, safe and responsible manner. We'll just turn to waste mining quickly. The waste mine was in line with the mine plan. And it was adjusted to the reduced ore treated during the year at 19 million tonnes, although on a like-for-like basis, lower than 2019. We are comfortable in terms of our waste mining and have no issues with any bottlenecks. Our steeper slope success in the Satellite pipe, which Clifford mentioned, and I'll talk to that a bit later again when we get to our long-term mine plan, there's been a great success in our Satellite pipe. And we're now also looking to implement the same steeper slope strategy in our Main pipe going forward. And that is work that we'll be looking at this year. Our ore tonnes treated in 2021 at 6.2 million tonnes, although higher than 2020, which was an anomaly, being shut for up to 6 weeks during the hard lockdowns at the beginning of COVID. But if I compare on like-for-like in 2019, we were down on 6.7 million tonnes. The ore tonnes treated were impacted primarily by the COVID-related challenges that you saw in supply chain management, skills availability, lost shifts. This not only impacted our tonnes treated but also our mining production as well. We also had to reduce our fee to our PCA in order to ensure the longevity of our aging PCA as we move into the project this year with the construction of a new PCA. And we reduced the feed rate, which impacted the feed to the plant as well. And we had a major jaw crusher breakdown at the end of Q3, which took about 14 days of downtime of that to manage and get up and working again. In terms of carats, at 115,000, that is in line with expected grade from the treated ore. The next slide, please. In terms of 2021, our major focus and important projects, Clifford mentioned earlier, we've done a lot of work in terms of looking at the stability of our -- of the rate and the feed rates and the production going through the plant. And we've implemented an advanced process control. We've seen some very positive results in Plant 1 and will be ready to start into Plant 2. Clifford mentioned the surface miner trials, which were concluded in Q3 last year and looking to do further trials with more matched piece of equipment in 2022. And coming out of that, we'll have some very positive results as well. The cost containment and reduction initiatives, they continue. This is always something we're looking at. An important and value-accretive example we did is the initiative we implemented to reduce waste haulage distances. This has given us a savings benefit of approximately $2 million per annum going forward in terms of reducing our haulage businesses, which reduced waste haulage costs and diesel. And we've also looked at electricity and water-related efficiency initiatives, looking at peak demand management, water recycling, capturing runoff and reducing -- sorry, in recycling our plant water usage. And at this stage, we are using more recycled water than fresh water. So that was a very good initiative that was implemented over the last few years. In terms of our resource ore drilling program, we managed to advance that in difficult circumstances. Of the 24 drill holes that we've targeted, only 4 remaining wet for space in the Main pipe to complete this in Q2. Our large diamond recoveries, although mostly in line of our 13-year average, we would like to have seen certainly more plus-100 caraters, especially given our record-breaking year last year in 2020, where we sold 16 plus-100 caraters, which we haven't seen before and also 29 60-100 caraters. We did see a good increase in our 10-60 caraters. But obviously, we'd like to see more of the largest diamonds going forward. Lastly, just an update on our revised long-term mine plan. And as Clifford mentioned, the good work that we've seen and the very positive results in our mine plan optimization, both short, medium and long term, together with the implementation of our steeper slopes in the Satellite pipe has resulted in a significant amount of additional ore availability in our Satellite current cutback, approximately 6 million tonnes when compared to our 2019 plan. This has extended the life of our current cutback, which is Cut 5 West in the Satellite pipe to 2025, whereas in our 2019 plan, that ended in 2023. This, in turn, has allowed us to defer the commencement of the next cutback in Satellite pipe to 2024. And the result of that is a significant waste reduction over the next 2 years, reducing our waste in 2022 and '23 to 11.5 million tonnes per annum and with the intention of ramping up in 2024 to 24 million tonnes per annum as we bring Cut 6 West. The ore mining remains constant at 6.8 million tonnes from 2024. You will note in 2023, and with a slide on the next page, that the ore treatment goes down in 2023. That is because our current third plant is being demobilized this year and with the intention of building a new third plant in -- for commissioning in 2024, which will bring our ore production back up by another 1 million tonnes per annum again. In the meantime, during the year, we also completed a conceptual preliminary underground study for quick access to the Satellite pipe. Initial results showed a positive trend enough to -- for us to have a look and evaluate a tradeoff between going ahead with the Cut 6 West, which is the next cutback in the Satellite pipe or to move underground. And that will be evaluated during the course of this year following a feasibility study. We will update the market as that information becomes available. The next slide. This is just depicting what I've spoken about is our waste profile and ore profile for life of mine based on Satellite Cut 6 West commencing in 2024. And as I mentioned, this will be looked at over the next 12 to 18 months as we evaluate the underground against the Cut 6 West cutback. Thank you, Clifford. Let me hand back to you for the sales and marketing.

Thanks, Brandon. This slide sets out more detail on 2021 sales. You'll see the bottom bar chart, we're a little bit behind where we were last year in terms of average dollar per carat. And I think that's mainly because we only recovered 6 plus-100 caraters compared to our long-term average of 7, 8. But that is in comparison to the previous year, when we had sort of 15, 17. So it wasn't a great year in terms of plus-100 caraters. But from the 10-60 caraters, we really did have a good year. I've spoken about the Dubai viewings and also the continued recovery in the market. On the next page, we've got some photographs of beautiful diamonds we recovered. Bottom right-hand corner, a small pink diamond. That sold for about $120,000 a carat, which really is significant. We've seen very high prices for blues and for other pinks. So the demand is definitely out there for these rare colors. Just to put it in perspective, if you look at the bottom left-hand corner, 65-carat white diamond, a really very top quality stone. As you can see, not too much breakage and a good yield is coming out of that. That diamond, we sold for about $47,000 a carat. Just to put it in perspective, when the market was at its worst, we were selling these sorts of goods at about $38,000, $30,000 a carat. And the highest we've ever achieved for these sorts of diamonds was $62,000, $63,000 a carat. So there is a way to go in terms of getting up to the very top profits. Thank you. Mike, we will hand over to the main part of this presentation.

Thank you, Clifford, and good morning, everyone. I'll run through some key elements on the income statement. You'll see that our revenue for 2021 was $201.9 million. That was based on the dollar per carat that Clifford mentioned at $1,835 per carat off 109,000-odd carats sold during the year. And that's comparing to $1,908 a carat from the previous year, slightly higher but a lot less carat, 10% less at 99,000-odd carats. Royalty and selling costs, we pay the regulatory 10% rate in Lesotho, so that's the bulk of the royalty and selling costs. And then there's some selling costs for our offices in Belgium [indiscernible] and then obviously in Dubai as well. Cost of sales at $113 million is based on normal activities. In local currency terms though, we came within our expectations of costs. But the stronger rand during the year has had an impact on our U.S. reported costs. And that's why in dollar terms, it's actually higher than what we thought and anticipated it to be. COVID-19 costs, Brandon spoke about the work done on COVID and maintaining our protocols and processes and ensuring everyone's safety during the year. In 2021, these costs came out at $700,000, similarly and comparing to last year, that cost was $1 million. However, we had $2.9 million additional cost in 2020, which was primarily due to the shutdown and the closed period when we were locked down. Corporate expenses at $8.9 million, still below our target of maintaining costs under $10 million. $8.2 million of that is baseline costs and $700,000 refers to some of the projects which we undertook during the year, which in the prior year during COVID, we didn't commence or do any of those. These costs were also impacted by the stronger rand against the dollar, resulting in the $8.9 million. Pleasingly, we ended up with $57 million with EBITDA. And that flows down to profit before tax of $46 million after taking depreciation off and our finance costs during the year and then some noncash items, which is FX losses and gains as -- identified as noncash items. Income tax of $15.6 million is representative of the taxes in Lesotho. The rate in Lesotho is 25% on its operating activities there. Our effective rate is 33% and it's higher as we don't raise any tax assets on our corporate costs in the U.K. and South Africa. Attributable profit was $18.5 million before costs for Ghaghoo. $3.7 million was incurred during the year. $2 million of that -- just over $2 million was the actual cash cost, which is down from the previous year of $3.3 million. There was quite a bit of work to try and reduce our care and maintenance cost, notwithstanding we were running with a process to dispose of the assets. Just over $1.4 million of that represents a noncash write-down of some older inventory that was in the operation, which we took a view on to impair. Attributable profit at $14.8 million and earnings per share before the discontinued operation came out at USD 0.132 per share. And that's off the back of 140.3 million shares in issue. Clifford mentioned a dividend of $0.027, but I'll talk to that in a bit more detail in a few slides' time. On the cost analysis, you will see that, and following Brandon's slides, we increased our production by 15%, up to 6.2 million tonnes this year. In overall aggregate local currency costs, we incurred ZAR 1.2 billion in costs, which was also up 15% from last year. So it flowed directly from the increase in volume. And as a result, we ended up with a very similar unit cost per tonne treated. The third plant operator costs came out at LSL 15.53 a tonne. And that cost is based on revenue that we generate from the production of that third plant operator. So that was quite consistent in terms of our revenue profile for the period. The direct cash costs then again ended up very similarly at LSL 201 a tonne before noncash accounting charges. And you'll see that drop from LSL 118 last year to LSL 70 a tonne this year. Those costs are predominantly driven by waste amortization, which we account for based on the mix of ore that we treat during the year but also movement in inventory, diamond inventory and movement in our stockpile. We did build up some stockpile at the end of the year based on increased production requirements and volumes during the period. So that had a decrease in our cost, together with a strong production in the last quarter of the year and predominantly in the last month, which resulted in additional carats on hand at the end of the year. And therefore, we had a reduced cost coming through. So total operating costs standing at LSL 271 versus LSL 320, 15% down from last year. The exchange rate, as I mentioned, was stronger. Our average for the year was LSL 14.79 versus LSL 16.47. And that resulted in a U.S. dollar cost of $18.38 all-in cost, total operating costs for the year. Waste tonnes mined, you'll see that was also up 20%, in terms of volume, up to 18.7 million tonnes. And that total cost was LSL 815 million in local currency terms or rands on a 1:1 equivalent, which was also up 20% in line with the volume. And again, you can see on a unit basis, was relatively in line with the prior year. Again, that impacted in dollar terms would be different exchange rate, and we ended up with $3 a tonne per waste mined. If I can then move on to the financial position. And a couple of points to highlight here as well. Notwithstanding the movement of the rates used during the year, our closing rates, exchange rates at the end of the year, December '21 was LSL 15.96. And that compares to LSL 14.69. So that also had an impact on the closing balances at the end of the year and would have reduced some of those balances really because of a differential in the exchange rate. But a couple of items to highlight. Deferred item on current assets, you will see that went to $35.3 million from $32.4 million. And again, that's in line with comment I made earlier on that we've had an increase in inventory, both in stockpile and in diamond inventory, which pushed that value higher. Income tax receivable, you'll see we've got a refund there of $1.2 million. I'll talk to the tax in the next slide, when I refer to cash movements. But that's off the back of having a payable on the very bottom line in prior year of $11.9 million, which was settled during the year. So there was a big swing in our tax movement or cash flow of tax during the period. Just under the liability section there, you'll see the very first item, which is interest-bearing loans and borrowings, $11 million versus $16 million. We paid back some of the workshop facility, and we've got $2 million of that $11 million remaining on our workshop facility, which is a term loan. And that will be settled by September of this year. The rest of the facility liability there relates to our revolving credit facility at the corporate office of $9 million, which was drawn down at the end of the year. Noncurrent liabilities of $13.3 million versus $14.4 million. And that's our environmental provisions. And the movement there was predominantly driven by that different exchange rates that you see as well. If we move over to cash management, we have two graphs here. The top right-hand graph is just an indication of our corporate cost over the period. Although slightly higher than last year, there was some budget costs included in that. We're still pleased with the overall value and the trend of coming down over a longer period. On the cash side, we ended up the year with $31 million of cash. And taking into account those liabilities or drawdowns that I mentioned, our net cash position was $21 million. Clifford mentioned earlier in the presentation that we concluded our debt refinancing. It was a significant project that we did. We aligned all our facilities into a single process. We brought on a new lender. RMB has now joined Standard Bank and Nedbank as part of our lending group. We maintained a $30 million facility at our corporate office level. And we managed to increase our facilities at Letšeng from LSL 600 million, which includes a general banking facility of LSL 100 million, up to LSL 850 million. So that was quite pleasing to put that in place. That results in $83 million overall facilities in place, of which $32.3 million of that is sustainably linked loans, which means that based on certain KPIs and targets, we will get a reduction on [indiscernible] rates on the targets that we've set with regards to carbon footprint and some water quality KPIs. Available facilities is $74 million at the end of the period, taking into account the drawdown. I'd just like to take everyone through some points on the waterfall. And there, you'll see that Letšeng predominantly generated $115 million worth of cash flow. And that's before waste investment on the next column of $65 million. The next column there of $24 million referring to tax, as mentioned on the previous slide, $12 million of that related to tax obligation in 2020, which was settled in March this year. The balance of the $12 million was the taxes paid for this year, resulting in having a small refund and having settled all our tax obligations intended for 2021. Corporate costs, we spoke about this, the $8.9 million includes some depreciation costs in there. So that was relating to corporate office. Our dividends to NCIs, that's our noncontrolling interests. The government of Lesotho is 33% at Letšeng. That flowed out when we drew out some LSL 400 million worth of dividends out of Letšeng. We had an increased investment into working capital. I mentioned that our inventory went up, stockpile and diamond inventory. And as a result, we were $6 million invested into that. Investment in PPE, $4 million, it's quite low. Spending on capital, there wasn't significant capital there. And part of that or a majority that was the X-ray sorting that Brandon mentioned earlier. Dividends paid to shareholders was in June last year. Following the AGM approval, that dividend that we paid, $0.025 at that point in time. And then the Ghaghoo cost, as mentioned, was $2 million in terms of the cash flow and ending up the year with $31 million. Importantly, I'd like to just pause on the dividend slide. We've proposed a dividend of $0.027 at the Board meeting yesterday. And that's up from $0.025 in the previous year. But importantly, it's a second consecutive year that we're able to pay a dividend. The total dividend will be circa $3.8 million off the 140 million shares in issue. And that is just under 4% yield, taking into current share price at the moment. Our timetable is the last date of registration will be the 19th of May with a record date in 20th and is subject to AGM approval. As is the final dividend, we do require AGM approval. And our AGM has already been set at the 8th of June. And we then require a record to process the payment, so payment is scheduled for the 21st of June. In terms of the dividend policy and maintaining our capital repayment plan, annual cash dividend review is based on cash resources, on free cash and earnings generated and importantly, capital projects needed booked to guidance. On the next slide, you'll see there is some additional capital coming through this year. So we've taken that into account in determining the dividend to be paid this year. Special dividends, we'll look on special dividends if there's any significant diamond recoveries. Unfortunately, last year, there weren't any significant ones. We did have 6 plus-100 carats. But they weren't what we classify as significant. And then those didn't warrant any consideration for a dividend. Importantly though, a share buyback program is being considered. We have got authority until the next AGM to commence that program. And we will be looking at that in more detail in due course for consideration as part of our capital repayment policy. And then the last slide, I won't go too much into detail. And it is our 2020 guidance. It's based on the mine plan that Brandon has spoken to and put on the table in terms of the plan going forward. Just importantly though, the last point, capital, you'll see $25 million to $30 million is forecast for next year or for this year, should I say. It is higher than what we initially thought. There's a couple of new projects that have come in there. Part of that capital is the new PCA that Brandon again alluded to. We are looking at finalizing a term loan finance for that. So that will ease any cash flow requirements for that. But also, the underground studies that are being considered now have also been incorporated in these costs. And therefore, it is slightly higher than what we've previously considered. Could I hand over back to you, Clifford, for 2022 focus areas?

Yes. Thanks, Mike. What are we focused on this year? Our mine plan and pit slope angles are something that is receiving a large amount of attention. Obviously, it sets the path for the medium term. And so we've got to finish our core drill program when we get space in the bottom of the pit. So that will happen quite soon. After the business transformation, we swapped over into a continuous improvement program. And that has had some successes but not the sort of success that we would like. And therefore, we're ratcheting up our focus and attention on that. And I think we're moving more towards a mentoring and coaching program for our management staff and supervisory staff. And I think this is going to deliver a really important change in culture going forward. Our primary crusher has been operating for a very long time. And it is something that we are concerned that is getting near the end of its life. And so we have a project to replace that. Alluvial Ventures, who run our contracting plant, are about to be consumed by the increasing size of the pit. And we have had a very good relationship with them over the years. But it is a low-technology plant that they operate. And this gives us chance to apply the most modern thinking in respect of the change-out. And we are designing and are well down the road a smaller plant but a high-technology plant. Under the second column, I think the point to highlight is the bioremediation plant. We have run some trials pilot plant and this has gone well. We really have had good results in extracting nitrates. And so we are now moving towards making this a permanent part of our operation. Moving to the right, the future, I've spoken about downstream value. And we keep pushing on the technology side, whether it's an additional surface miner, whether it's recovery techniques and extraction techniques. We've got a number of smaller projects running. And these, whilst all interesting and pointing in the right direction, must say quite frustrating from a CEO's perspective in the amount of time it takes to make the sort of step change advances that one would like to achieve. The underground feasibility study and the tradeoffs that we have mentioned, that is important and interesting work which is going to make a lot of progress during the course of the year. And then the decarbonization strategy, climate change and where mining companies need to go and where they need to push towards is obviously a big topic and an expensive topic for us. We don't believe that small and poor countries, like Lesotho, are appropriately supported in this vital change, which has to happen. And so we are pushing this discussion with the British government in particular to come to Lesotho's assistance. And hopefully, we will be able to find a way that the country as a whole will be supported, in particular our business will not have to meet expenses which are coming down the road entirely on our shoulders. So that is that. I'm very happy to take any questions which you may have. So I will kick back to the operator and wait for any questions which you'd like to put to us.

[Operator Instructions] Our first question is from Richard Hatch of Berenberg.

Thanks for the presentation, and congrats on a good set of numbers. Got a couple of questions. Can you perhaps just talk us through your thoughts on the longer-term throughput outlook for Letšeng as AV rolls over from June and then you talked about the potential to put in a new plant? What is the thought process on what your throughput could be at Letšeng? And how much do you think it would cost you to construct that plant? That's the first one.

Yes. Richard, Brandon here. Just in terms of our AV plant, as you're well aware, AV has been with us for many years in terms of [indiscernible] and other technology. The new cutback coming through on the Main pipe on the Cut 4 West, which follows up the AV plant, has remained there. So you would have to either relocate that plant or, as we said, decommission it. And that has given us the opportunity to look at new options. We have got a number of tenders and providers on this, AV being one of them. And we're busy going through that process now in terms of building a new plant. And for that, you will recall AV produces about 900,000 tonnes a year, 0.25 million. We're looking to put in a new third plant to do approximately the same at about just over 1 million tonnes a year. Costing in that, we're busy looking at. But timing is we'd like to have this commissioned by the beginning of 2024, so in 18 to 24 months' time.

Okay. Does that -- so does that mean that throughput will reduce between now and that period because AV rolls? Or do you continue with AV? Or does it have to stop because the pit kind of expands into where it's operating at the moment?

Yes, it's the latter. It has to stop as of the end of June, so we can start the cutback on Cut 4 West shortly thereafter. It's about 2 months of demobilization after that. So you're quite right. And if you look at the plan that I put in, you'll see slightly reduced tonnes this year because we've only got AV plant up until June. And then next year as well, when we won't have the third plant producing, so you'll see in the plan, '22 and '23 have got slightly less tonnes. And then we ramp up to approximately 6.8 million tonnes from 2024.

Okay, I see. Okay, fine. And sorry if I missed it, kind of is it relatively capital-intensive that plant to put in or not? Do you have like a rough order of magnitude as to roughly how much you think it might cost?

No, it's not hugely intensive. We also look to finance it in a number of ways. And so it's not hugely capital-intensive. But from a financing perspective, we're looking at numerous options, whether we finance it, whether we build it or whether the third-party finances that over the years of their production contracts on site.

Okay. And then just on the kind of medium-term capital profile, Mike. So are you able just to give us a bit of a -- kind of a bit of a steer as to what the medium-term CapEx looks like? I think obviously, this year, the PCA has come in, and that's a reasonably a large capital spend. And I guess, that takes you through to end of life, I guess. What does the CapEx look like for sort of '23, '24? I guess, you got your thoughts on this additional plant that you can put in. But is there anything else that's in there that's lumpy that we need to be thinking about? Or should sustaining CapEx still kind of hover around about that sort of $10 million mark?

Richard, so the PCA will probably have some capital flow into 2023, so there will be some of that. You alluded to the fact that there will be capital coming in for the third plant. And depending on how we finance that obviously will have an impact. We're probably, in the short to medium term, would be taking those two significant capital items at around about the $10 million mark. There has been -- over the last 2 years, we've significantly dropped all capital. So there has been delays, albeit not to the detriment of the operation. I mean, we may need to make sure that we haven't had capital savings that would impact us in other areas. But I would say that probably $10 million to $12 million in the next couple of years would be sufficient.

Sorry, is that sustaining? Or is that total?

Total.

Okay. All right. Okay. And then sorry if I missed this, just on the underground, are you -- what are your kind of thoughts there just in terms of -- I mean, when are we going to hear more about that? Are you thinking kind of into access, talk on mining methods and volumes and such? Like where are we with that just in terms of your thought process at the moment?

Yes, Richard, that's exactly what we look at now. In terms of the conceptual study, that was done and completed last year. We're now moving to the feasibility. We're pretty much there in terms of our method and if we'd like to explore further as part of the feasibility study. And we're looking over the sort of next 12 to 18 months of updating the market in terms of that volumes. And that will all come out of the feasibility study and based on the method that we use, both the initial method and as we move [indiscernible].

Got you. And then my last one is just on the market, I mean, it feels like it's pushing up pretty aggressively. Some of your competitors have said prices are up anywhere between sort of 30%-plus in the year-to-date. I mean, at the top end, when you're looking at those bids and looking at the bids as they're hitting for your lots, how close is it at the top, kind of between the first and second bids? Is it quite tight? Or are you seeing kind of certain really kind of a big gap between the first and second? Or just trying to work out how hungry is the midstream pushing for goods if they really want to get them. And how much more do you think that prices can sort of grind higher, to your point, the top [indiscernible]

I mean, there's a great deal of competition to buy the goods because they are in short supply. From time to time, I mean, in most cases, the bids, the first, second, third, fourth and fifth bids, are normally bracketed very closely together. But from time to time, there will be an exceptionally high price offered, where you can see that the purchaser really does need that diamond and is willing to pay for it. It's normally in circumstances where they have a buyer and let's say, they've got -- I mean, just to use an example, they've got one earring and they need another one. Or in the necklace, which they're making for a customer, they're missing the sort of central, the main piece. And you can see in those circumstances that the customers are paying up. They want to be certain that they get the goods and they almost are paying over the market. But we have -- for any single item, we can have 60 bids. So it's a very, very competitive situation. And whilst -- I mean, I saw one of our -- one of the other mining companies had a sort of 40% increase in its average dollar per carat in the last sales, which they had not long ago. We haven't seen 40% of tender-on-tender, but we've certainly seen sort of 20%, 25%, so on a like-for-like basis. And then just to go back to give you the feel, our best quality white goods, that's our bread and butter, we're in the sort of $47,000 to $50,000 per carat range at the moment. The highest we were paid for those in 2011 was at $62,000 a carat. So I think there's a bit of a way to go. And hopefully, it keeps going and that the issues in the Ukraine don't cause difficulties in our world. If we can answer some of these questions from [ David Penman ], yes, prices, the '22 tenders, we've had 1 tender so far that's gone well, very well. As I said, we were sort of about 20%, 30% up. Our second tender is busy happening as we speak. We'll close it in a couple of weeks' time. There is a lot of interest. We're completely overbooked in terms of the viewing. So I think we should see strong prices there. How is the set of Ghaghoo price progressing? And Brandon, do you want to answer that?

Yes, briefly, just to update from our previous announcement, we completed a lot of work last year with Botswana Diamonds in terms of government approvals, which we received for the purchased site. Unfortunately, Vast, which is the funding partner, could not complete the deal. We are down the road with the new financing partner with Botswana Diamonds. And we are hoping that the next [indiscernible] we'll have some definite way forward on that.

Then David, you said clearance for underground mining, yes, we are quite well advanced in that. We've done a conceptual study. We're now moving to the next phase, which gets to the feasibility study. Before we get to that, we need to get approval from our Board to spend the capital because, of course, these studies cost money. And we're doing some of the tradeoff studies between underground and then the next cut. So we're going there. [ Michael Wolf ], why would you suggest the share price is down and rising inside of the diamond market? Yes, look, I think the diamond industry is really unloved. I don't think Petra Diamonds are achieving a higher share price growth. I mean, you have to look at our Board to -- we always looked at how we're competing against our fellow mining companies. And I think over the past 2 years, we've probably done a bit better than them, considering opportunities and investment also at Lesotho. Share buyback, yes, we have considered a share buyback. I think Michael spoke about that. And obviously, it is the best utilization of cash. The company is underpriced. And so I think you can expect to see something there quite soon. And some D&A for the year, please? Mike, do you want to respond to Kim?

Yes. Kim, so in terms of the depreciation, depreciation will be in similar levels to what we've got currently in our income statement. I think it was at $8.5 million. And then in terms of our mining mix for the amortization and the write-off of waste amort, this year was somewhere around $45 million, $46-odd million. And that's based on the mining mix that was about 3-plus million tonnes of Satellite coming through. And you'd expect a very, very similar cost coming through in the new year.

Well, the sales process, I think we've spoken about that. And AV, we've dealt with that. What would the financial results lift out in the absence of business transformation? [ Will Hillen ], I think we probably need to model that, yes?

Yes, I think there's a whole host of elements within that. Bear in mind that the business transformation had cost savings. So $100 million is not just cost savings, it would have been additional revenue. It would have had other efficiencies in it, very simplistic. I suppose you would assume that we would be $100 million of less cash on the balance sheet in theory over 4 years.

[ Will Hillen ], you say what's the point of looking outside Lesotho? Well, the point is if one was to come across a Jwaneng, then clearly, that would be good for everybody. So I think that's -- answers that. Large diamond recoveries were in line with the average. No two diamonds are the same, [ Will Hillen ], and you recover a 910-carat, for example, and that's $40 million. $40 million is a big difference from -- so let's say it's a very -- it's not the sort of diamond mine that it's not equivalent to a Liqhobong, where the run of mine -- it doesn't matter what you recover, it's effectively a widget factory. And that's not what Letšeng is. It's a much more unique sort of ore body. And there are times when -- I mean, I think our highest dollar per carat was above $4,000. And that was in 2011, was it? Yes, 2011. So it was an absolutely extraordinary year that year. So I think that's done. The impact of the closure of Argyle, I think, indeed, that's 20 million to 30 million carats taken off the market. And you would have seen how the -- that famous jaws of the crocodile graph is now opening up. We spoke about it for a long time previously and never seemed to happen. But now it is. I don't know if you've read the Bain report, [ Will Hillen ], but if you -- that's a very good resource about the diamond industry. And in it, they've propped up what is likely to happen from a production perspective going forward and the number of mines which are either closing or going deeper and what is happening to total supply. And I think the closure of Argyle has really been responsible for some of Petra's -- the increase in Petra's goods whilst they are not at that low level of sort of $30 per carat goods, it's $70 per carat and upwards, it's the same sort of category, not exactly, obviously, but the same sort of category. And that has -- that really has been a big impact of Argyle's closure. Is there scope to lower the effective tax rates? Mike, do you want to answer that?

Yes, [ Will Hillen ]. And yes, so theoretically, that is correct, you would reduce the tax rate if you could get all your costs into Lesotho. However, we just need to bear in mind that being a U.K. listed company and being on the LSE that this structure itself has got its own obligations for listing. About 30%, 40% of our costs are actually U.K. costs based on our listings. So those costs wouldn't flow through. So we also looked at it. We do try and assess how we can reduce our tax obligations effectively. But we unfortunately can't move our whole U.K. just to get down to South Africa -- to Lesotho.

Michael, what would you say to private shareholder, 50% drop in the share price over a 5-year period? I, too, am a large shareholder. And I am as disappointed as you are. I think the valuations, which are -- a company such as ours, which has a $50 million EBITDA, produces cash, I find the valuation quite staggering to say the least. We are a dividend payer. This has been the third dividend we paid, second in a row. Another shareholder raised the question about share buyback as a better use of capital. We have a number of shareholders who prefer a dividend because they believe that it is in the best interests of all shareholders to be treated equally and there is obviously merit in that. And at the same time, we have seen instances where miniscule volumes have dropped the share price dramatically. So we think that a combination of a share buyback and a dividend is probably the best way to protect the share price for all shareholders. And to have that buyer of -- should I say, buyer of last resort for small volumes, we really hope that this is going to have a significant impact. And then [ Ashley ], what grade variation do you anticipate in 2022 versus 2021?

Yes, I'll pick it up. So the grade you will see in the guidance we've provided is roughly just around about 2, which is in line with a similar mining mix of taking about 3 million Satellite tonnes through the plant. There is some K6 material coming through, which has got a higher grade. And therefore, it will be around about the 2 mark.

And point number two there, with reference to the cash management side, which items are not repeated in 2022? I mean, there are some projects which are not -- which are complete, which won't come through. I mean, Mike, do you want to speak in detail?

Yes, I'll answer that. So I suppose the biggest change will be the waste capital investment, $65 million, on the slide that we had, referenced to about 18 million, 19 million tonnes of waste. We're looking at doing 11 million tonnes. In the current year guidance, it's 10 million to 12 million. And the costs will go up. It's gone up to LSL 51 to LSL 53, so it's more closer to just under $3.50, and that's because of doing less volumes. So you will take off some $25-odd million -- $25 million to $30 million of that $65 million. And then the other cash flow that won't take place in the year is we paid tax of $24 million, which again was effectively 2 years of tax, we'll really see 1 coming through. And so that should halve to about $12 million. And then obviously, our biggest driver -- or one of the drivers Brandon mentioned was to view the sale of Ghaghoo, so we wouldn't have those cash flows going through. Otherwise, the rest of it is very, very old standard.

And then point number three, [ Ashley ], the buyback, yes, indeed, we believe that the company is grossly undervalued. In any metric that you apply, we have a decent resource. We have a good cost containment, we believe. Our standards are higher, be it governance standards. We've worked hard to cut out any wasteful expenditure. And we think that it's very difficult for us to see why it is that the business is not valued or appreciated more so. We've looked at whether a Lesotho discount, doing business in a small African country is something to penalize the business with. I think there is -- the reality of having one asset, one geography is a factor and -- but we have tried very hard over the last 4 or 5 years to try and participate in a sort of a consolidation, whereby a single management team would be able to manage 3 or 4 assets. Unfortunately, we've never been able to agree terms with any of our competitors on a basis which will work for our shareholders. And so we haven't been able to deal with that issue, in other words, the issue of having more than one ore body. So yes, we do think the stock is undervalued. We're working hard to try and do something about that. And Michael, I think that goes to your point, too. Thank you. Right. Anything -- any other questions, which we haven't dealt with at the top, Mark? 8 years, 100 -- yes, same point. It's a real problem. And it is -- it's unacceptable, frankly. None of us like to see our capital decimated. And we will do our best. We have just completed a strategy session, where we look at this and have had significant input from our banks, merchant banks and trying to pull apart the reasons for this. I think the share buyback process, together with the dividend, should have an impact to have a buyer -- not a buyer of last resort, but to have a company putting its money where mouth is as it were, I think, is going to have an impact, I hope so. All the academic studies suggest it should. But you don't really know until you've been doing it for a while. There are some practical limitations. Stock exchange rules only allow you to spend a certain amount of money and buy a certain amount of volume on any particular day, so is not quite the overall solution that I would like because I'd like to be more aggressive. So we are a bit constrained, but we certainly are going to give it a good effort. Right. Any other questions? Or are we -- thanks, Matt. Waste capital costs should reduce. Okay, just to clarify, what's -- $25 million to $30 million, it's maloti, right?

No, it's not. We've got $65 million actually. You're asking about the waste dropping. So we're going to have about 11 million tonnes of waste at a cost of about -- yes, 11 million tonnes compared to 18 million tonnes. And the cost will be about LSL 53 a tonne, which equates to about $3.50 a tonne. And that comes out to, I think, about $35 million versus $65 million.

Yes, so the $30 million saving is correct. All right. Anybody else? Or can we move towards closure, please? Right. Thanks, everybody. We will declare this closed. If there are any other questions which you haven't thought of right away, please send them to us. Happy to engage either by e-mail or by telephone. Very happy to discuss any of these topics further. Thank you very much.

Thank you very much, sir. Ladies and gentlemen, that then concludes this event, and you may now disconnect.