Gem Diamonds Limited (GEMD) Earnings Call Transcript & Summary

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

Right. Welcome, everybody. Sorry about that technical hitch. It's the annual report and accounts for Gem for the year ended December 2022. If we turn over to Page 3, please, [ Janine, ] right? Here's the highlights package. I'm sure you've all had a look at this while I was talking. I gather you couldn't hear what I was saying. A few points that I'd like to draw your attention to. EBITDA figure, $43.7 million. Carats recovered on the top right. The all injury frequency rate is a good result. We'll talk about that in some detail. And then an important point is the dollar per carat achieved, $1,755. And on the bottom right, the dividend and share buyback, a combination, $4.8 million, and Michael will refer to that in some detail. Can you turn over the page, please, right? The key strategic priorities. We are aiming to produce the best diamonds. By that, we mean the highest quality, the highest dollar per carat, which come out of Letseng. Many of you will know, for the past 20-odd years, the mine has produced wonderful quality diamonds, and that continues. In the best way, we're talking here about our communities, employees and the host country, and we want to leave a lasting legacy in the country that talks to the tax, the royalties and all the various revenue streams which flow into the [ suitor ], and which leave infrastructure and pay for other very necessary services to the nation. The 3 columns there. Extracting maximum value. We work responsibly, maintaining our social license and preparing for the future. Those are the 3 columns against which we set out our [ stole ]. I think if you look at the preparing for the future, obviously, we are depleting the ore body over time, and therefore, looking to the long-term future, it talks to the Underground Feasibility study in which we've made good progress, and we will speak about that in some detail, the long-term mine planning and optimization, and then other growth opportunities. The bottom bullet point, renewable energy plan. We, like all other mining and other companies operating in Southern Africa, are victims of a [ falling ] electricity supply, and we are having to meet those challenges, which are -- which is proving to be difficult. We are making plans, and we will speak about those in some detail. Next page, please. The diamond market improved overall in 2022 vis-a-vis 2021 and there were a number of interesting and significant impacts. The Russian invasion of the Ukraine centers a shock through the system which drove up diesel prices. Our supply chains were disrupted, and everything else surrounded with sort of fossil fuel supply, talking about explosives, and the impact on inflation. We're quite unplanned for, obviously, but we have to react to those. On the other side, the China's slow re-opening after the COVID situation towards the back end of 2022, really has given a jolt of confidence into the market. Indeed, the recent sales and trade fair done -- and trade fair in Hong Kong was very, very buoyant, very positive, and there's a lot of positivity overall which is emerging as a result of that. There was a strong demand through 2022. And initially, the sanctions on Russian goods and Alrosa deciding not to sell their goods for a couple of months, caused a quite significant spike in the smaller goods. Towards the back end of the year, it became clear that the Alrosa goods were back in the market. They were selling even via Belgium, but mainly to Chinese and Indian clients who operate outside of the dollar system, and so, that caused amelioration in those prices. You will have seen that the luxury jewelry brands really had an excellent year in 2022. And the increasing trend of diamonds into just about every luxury brand is noteworthy, and we certainly are playing a part in that aspect. So our market position on the right-hand column. We're well known to be one of the highest dollar per carat in the industry. Our quality is excellent as a whole. High value goods prices went up, not as significantly as the less than 5 carat goods, but nevertheless, a decent increase, and demand is extremely strong. The bottom point, we have for some time been directing a proportion of our production into some of the most well-recognized brands in the industry and giving them the stones which they need for their production plans. They have achieved really good results off of this, and this part of our business is growing strong. If I can turn to climate change, and Brandon, if you deal with this, please?

Thank you, Clifford, and good morning, everyone. In 2022, we continued our focus on cementing our approach to climate change into the way we do business and how we operate. This involved successfully completing our Phase 2 of our TCFD adoption road map with full implementation started [ before ] in 2023. And this included, firstly, the advancement of the materiality assessment of our relevant physical and transition climate-related risks and also the development and adoption of our carbon pricing model, which we have now integrated into our operational and project feasibility assessment process, and this ensures that the impact of potential future carbon-related costs are able to be considered both in our operations and future projects. The -- we made a considered move in terms of our decarbonisation, I'll talk to [ it ] on the next slide, and establish our Decarbonisation and Energy Committee. And this committee is focused on assessing our lower carbon and renewable energy sources and options that Clifford mentioned, and also to drive our newly adopted decarbonisation strategy. The outcomes of our efforts in 2022 were noteworthy. And in terms of our Scope 1 emissions, our fossil fuels, we worked hard to further reduce our waste rock hauling distances. This reduced not only cost, but also our carbon emissions. And in addition to that, we worked to implement the steeper slope, which I'll talk about it a bit later as well -- into our Main pit, which reduced our volume of waste west and then begin to mine. Together, this resulted in an 18% net reduction in our Scope 1 carbon emissions, and that's not withstanding the increased generated users that we needed to run our plants efficiently given the load shedding we experienced throughout the year, in particular, the impact in H2. In terms of our Scope 2 grid emissions, we've worked [ tirelessly ] this year to implement energy use efficiency initiatives in our plants. We also optimized our lighting and heating and other energy consumptions. And we've improved our energy demand management significantly, taking to consideration the pressure we have on energy from the grid. This resulted in a 24% net reduction in our carbon emissions from our Scope 2 emissions. And add to that is obviously the reduced interest and usage during load shedding. In terms of the achievements of this, we saw a 31% reduction in total energy consumption, which is significant for the year, and we continue this drive to ensure that our energy consumption levels get as low as possible. I'm also pleased to report again that we won the Best Climate-Related Reporting (Small Cap) award. This is a climate change focus report and this is one of the ESG Investment Awards at the Mining Indaba. Next slide, please, [ Jane ]. In terms of our decarbonization strategy, our focus in driving decarbonization throughout the business, culminated in us committing to a 30% reduction in our Scope 1 and Scope 2 emissions by 2030. As Letseng accounts for about 98% of our corporate footprint, our focus will be on driving decarbonization at the operation. And we are using 2 key units to achieve this. Firstly, as I mentioned, to reduce our energy consumption through operating process and equipment efficiencies, and also to replace our fossil fuel-based energy, which is both real energy currently, and these will generate a use with lower-carbon and renewable energy sources. With this being ongoing -- and it has intensified during the year to identify, assess and implement lower cost and lower-carbon energy sources, as Clifford had mentioned, and this includes assessment of potential hydro, wind and solar options. Next slide [ Jane ]. Moving on to operations. As always, safety is our first focus, and our focus on zero harm continues to be a priority for us. During the year, we advanced our organizational safety maturity strategy, the strategy we started in 2020 and 2021. And we're starting to see significant benefits of this, and in particular, saw increased safety performance in 2022. From a stats perspective, again, 0 fatalities. And although we saw 3 LTIs during the year, it's down significantly from the [ sets ] we saw in 2021. This brought our lost time injury frequency rate down to 0.13 as opposed to 0.24 in 2021. So significant improvement there. I'm also very pleased with our all injury frequency rate, which went down to 0.70. That's a good diamond trend that we've seen since 2018 and down from last year. Our focus on environmental and our responsible mining continues. We saw no major or significant environmental incidents and no major or significant social incidents during the reporting period. Here I'm also pleased to announce that we won the Health & Safety award, the Junior ESG Award at Mining Indaba, and this is really the work that we did in 2021 in terms of safety and safety stocks focused on maturing our safety culture through our operations. In addition to this, we have a lot of work and focused on our dam and to maintain storage facilities and continue to [ climb up ] the year. We've aligned ourselves to the Global Industry Standard on Tailings Management, and during reporting period and before we see no incidents that have compromised the integrity of either of our tailing storage facilities or our dam. Moving on to our CSRI commitments. In 2022, we saw the successful implementation of our CSR strategy, this after quite a difficult year in 2020 and beginning of 2021, through the challenges we saw in the setting up communities during COVID. It was good to see that improved last year, and we were able to build on our [ own ] strategy. We've contributed to our water and sanitation infrastructure, contributions -- tertiary scholarships and improved infrastructure at schools, Lesotho Legend egg project both the ground and its operational. And the picture on the slide shows our egg farmers and the egg project operation. And we also contributed to small and medium size enterprise development in our communities. Our bioremediation project was advanced during the year. And again, pleased that our first 2 units to treat water from our waste dumps in terms of reducing nitrates coming off the waste dumps commenced in Q1 of this year. In this regard, we also won the Junior ESG Award at the Mining Indaba for responsible water management, and related specifically to this project, and the manner in which we are going to be treating the water through the bioremediation project. In addition, we retained our ISO 14001 and ISO 45001 certifications. And this, for 6 consecutive years, which is testament to the upkeeping of our standards in terms of [ healthy ] environment through the operation. And also we retained our FTSE4Good status for the fourth consecutive year and signed up to the UN Global Compact and became a member in 2022. In line with that, we continued the integration of our 6 adopted UN SDGs, which commenced [ few ] years ago. And in this year, we'll be adding additional SDGs -- UN SDGs into our operational [indiscernible]. Letseng. Our operations -- in our view for 2022, as Clifford said, it was a challenging year for operations for a number of reasons, which I will touch on, but [ its ] safety performance nonetheless. I've mentioned the reduced waste volumes, and seeing the graph on the right, we believe, approximately 10 million tonnes of waste 2022 down from 19 million in 2021. This is as a result of both being in line with our current mine plan and also the reduced waste tonnes from steeper slopes and the implementation of that in the Main pipe. To speak on that very briefly, we steepened the slopes during our BT process. And in that process, we worked on ensuring that we had sufficient berm retention and blasting techniques to maintain our berms. And the impact of that is that, we were able in Satellite pipe to further increase the steepness of the slope and access additional ore. And this is through a successful planning in the Satellite pipe. We've now moved that over to the Main pipe into our final [ cutbacks ] here, which is Cut 4 East and West. Our ore tonnes treated, as you see in the graph on the bottom left, 5.5 million tonnes, down from 6.2 million tonnes in 2021, was impacted primarily by the third plant contractor AV coming to an end in June last year. And this was directly as a result of our commencement of Cut 4 West and that operation in [indiscernible] and the contract -- April, coming to an end. We also experienced significant electricity grid interruptions, which caused a number of trips last hours and also increased maintenance to the plants. And the Lesotho -- successful Lesotho election -- national election also a 2-day shutdown for that. The Carats recovered in 2022 and is in line with the grade -- expected grades from the treated ore and can be seen in the growth of 107,000 carats in 2022. our large diamond recoveries on the next slide. Here, we -- although on average of most of the [indiscernible], we're pretty much in line with our long-term average and slightly down from 2021. I'll note really here, it's only 4, plus 100 carats were recovered last year as opposed to -- usually expect an average of 8 on our long-term averages. But overall, through the size fractions, pretty much here. And this is really dependent on the areas of the fastest domains that in mine in a particular year -- in the Satellite or Main pipe. Briefly on our projects. We've progressed the replacement of our primary pressing area and in order to provide a more steady and consistent feed to our plants with improved fragmentation, and this is really to replace our aging PCA that has been in operation for many years. We look to complete this project in Q2 of this year. Our Reserve and Resource Statement, we completed a Resource drilling between '22 program, and we are aiming to complete and have our Reserve and Resource Statement by end of Q4 2023. And importantly, in line with this, and our discussion on the next slide is, we commenced our Underground Feasibility Study also for completion in Q4 2023. Our focus throughout the year was on reducing cost and decarbonization initiatives, and we saw the [ impugning] impact of that. Moving on to our long-term mine plan. Firstly, I will just talk about Main pit and the impact of what we did in 2022 on our long-term mine plan. I've mentioned the implementation of steeper slopes and the continued optimization of our mining and the Main pit, and that is really the shorter haulage distances that we were able to implement. Again, this year, we did a similar project in 2021, which brought about a saving of approximately $1.8 million a year. And we further shortened those distances on finding closer dumping area and have increased that by further 10% savings in the next 3 years, and on that. The reduced waste volumes due to a steeper slopes is approximately 2.7 million tonnes at the life of mine, but importantly, the steeper slopes in both cutbacks in the main pipe have delivered 5.3 million tonnes of additional ore over life of mine. You'll see on the next slide that's impacted the overall life of mine to 2040. Our Satellite pipe. We had significant challenges in our mining and Satellite pipe. The contact between our basalt and kimberlite was not at the area where we expected it to be, on previous [ determined ] delineation and it [ staked ] out. This caused an urgent pit redesign that was required for safety reasons. The area around the contact being sort of less stable than in the basalt or further in the kimberlite. This -- the new pit design, we had to step in, and the result of that was a deferment of approximately 1.9 million tonnes from our current cutback [ EV ] to -- at 6 West or into the underground [Technical Difficulty] site to proceed with. And this had resulted in pipeline [ Letseng ] current mine plan ending in 2024. And that excludes any additional terms from ended [ cutback ] mining, which we're currently assessing the ore options to bring a bit forward -- a bit more forward into Cut 5 West. The quickly [ deliver ] vast mining profile -- waste mining profile for 2023 will be 10 million tonnes and with this intended start of Cut 6 West in 2024, waste mining will increase to approximately 23 million tonnes a year. This is, of course, subject to the studies -- trade studies currently in this year, which is a trade between continuing the Cut 6 West open pit or implementing an early access undergoing mine. The ore mining remains constant through the mine plan and that is at approximately 5.6 million tonnes per annum from 2024. And as I mentioned on life of mine, on this basis to 2040. On the next page. That just depicts the growth of what I've spoken about, in terms of our long-term mine plan the Cut 5 West in the second half pipe, 3 million tonnes this year, approximately 2.7 million, 2.8 million tonnes next year. And then with our -- the impact of Satellite Cut 6 West mining coming in 2024 as well, with its ore availability from [ 2020 mine ]. And on the current treatment rate of 5.6 million tonnes, as mentioned, our life of mine is [indiscernible]. With that, Clifford, I hand back to you for sales and marketing.

Thanks, Brandon. Our diamonds are in big demand. And there, we set out the picture of where we earn our revenue per size fraction. And as you can see, nearly 70% of our goods are in -- what is known in the industry as special diamonds that's greater than 10.8 carats and then the balance between the 5 to 10 carats and the less than 5 carats. 2022 overall, $1,755 average dollar per carat, marginally behind 2021 and 2020. All diamonds recovered greater than a 100 carats. Brandon spoke about the fact that's less than our long-term average. I'm happy to say that the year-to-date has started off reasonably well, and we have recovered some greater than 100 carat tones in the early part of this year. If we turn over [ Janine ] to the next picture, here are some of the diamonds we recovered during 2022. So the 99 carater, it's a carat less than the 100 carats, and so, it doesn't feature in those statistics, but nevertheless was a lovely diamond. The bottom left-hand corner, that really is a signature diamond for us, great shape, high yield. And as you can see, resulted in the highest dollar per carat we achieved in 2020, that was about $53,000 a carat. If I can then ask Mike to deal in detail with the financial results. Over to you, Mike.

Thank you, Clifford, and good morning all. On this slide, we will just run through our income statement and our results for the year. We'll see we generated $188.9 million dollar of revenue, and that's the back of 107,000 carats sold at the average dollar per carat of $1,755, as alluded to earlier, and that compares to the prior year where we sold certain 2,000 carats more at $1,835. This production was obviously based on the 5.5 million tonnes of ore processed compared to 6.2 million last year. So we have had an 11% reduction of throughput, which Brandon had discussed earlier. Royalties and selling costs of $20.3 million is based on 10% royalty that we paid to the government [indiscernible] together with our sales and marketing costs in Belgium, and including Dubai when we've had some of the viewings there. Cost of sales increased $216.2 million compared to $117.5 million last year. We have had some benefit of the FX and the impact on that on our costs with the exchange rate or average exchange rate going from $14.79 last year to $16.37. However, in local currency terms, we've had significant headwind with costs. We've had higher than inflation costs coming through. And in particular, I'll just focus on diesel. We've had a 68% increase in our diesel cost for this year when compared to last year. That's notwithstanding a 5.6 million liter or lower diesel consumption during the year. That consumption is split up in that we've had 2 million liters of additional diesel just because of low check to run the plot and the site services, and we've had some 7 million liter less due -- on the mining side, driven by lower volumes and including some of the initiatives such as the total -- all businesses that Brandon alluded to. But the diesel price has been a significant issue together with the impact of load shedding. We have got some, and small amount of carat related costs. We continue to monitor and just ensure that those procedures and protocols we implemented are maintained and there's some oversight on that. Corporate expenses increased slightly from $8.4 million to $8.6 million. And the biggest driver of that was the cost of insurance for the group increased on the corporate side of $300,000, and that is an effect of the --partly of the insurance market based on the COVID changes of the previous year, and we saw those premiums following through into the current year. Taking all that into account, EBITDA decreased to $43.7 million from $57.4 million last year. Other expenses, you'll see these, $2.4 million versus $3.3 million. That relates now to Ghaghoo. And in the past, we used to disclose Ghaghoo as a discontinued operation or available for sale assets. And that was on the basis that the asset was in the [ process ] of being sold, and we had a constructive agreement to sell it at that point in time. However, during the last part of the year, that agreement was not concluded or fulfilled by repurchaser and we've had to reassess the disclosure of the asset, and we've now put it under other operating expenses. That project though is still ongoing in terms of its sales process for other opportunities to look at reducing the effect on our balance sheet. Net finance costs of $4.1 million. $1.3 million of that relates to the unwinding of rehabilitation provisions and is non-cash flow. The balance of $2.9 million relates to our debt facilities that we utilized during the year. We have revolver facilities, and we've dipped in and out of those facilities during the year based on the timing of tenders and the cash flow needed with monthly creditor and purchase payments. Noncash items of $1.6 million. That mainly relates to positive effect of the Forex gains we've generated during the year. Again, taking that into account, profit for the year was $30.4 million before income tax of $10.2 million. Just to remind everyone, the future tax rate in country is 25%, and we pay that directly on the [ suitors ] -- the same assets' profits. And then together withholding tax on the extraction of dividends out of Letseng through to the corporate side ,incurs a withholding tax included in there. Noncontrolling interest is $10 million, and that represents a 30% government portion or interest in the same diamond mine, and that flows through then to attributable profit of $10.2 million and taking into account $139.8 million shares in issue of the average euro, we've ended up with an earnings per share of $0.073. If I then move over to the cost analysis, again, just detailing the award treated and the volume of throughput that was generated. You'll see that direct cash cost has jumped up to 252.5 [indiscernible] -- sorry, 252 maloti per tonnne. Again, that's impacted by the lower tonnes throughput, and then mainly with the impact of those costs that I alluded to earlier. The Plant 3 operator costs, $0.105. Again, Brandon alluded to the fact that AV, [ your ] plant operator terminated -- contract terminated in June. As a result, that is just the basis of the cost we pay -- we account for, which is based on the revenue they generated and that reduced because they didn't operate throughout the year. Current direct operating cost, therefore, was 263 maloti per tonne. We've put noncash accounting charges. Noncash accounting charges comprised the stockpile movements, waste amortization and changes in inventory volumes. It's relatively static compared to last year and also impacted by the lower tonnes. That results in a 345 maloti per tonne operating cost, which is the cost that we see in our income statement. Taking the exchange rates into account of $16.37 and $14.79 last year, that turns out to be $21 a tonne versus $18 [indiscernible] of the prior year. On the waste side, again, there was a significant reduction in volumes from 18.7 million now to 10.2 million, and you will see an increase in our unit costs, again, driven by the lower volumes. Lower volumes are impacted both through the fixed support side of a contract, which obviously increases on a unit basis, together with the diesel price that I alluded to earlier. Again, taking exchange rate into account, our waste cost per tonne went from $3.00 a tonne to $4.08 a tonne. Looking at the financial position, taking into account the exchange rate of $15.96 last year, which was a closing rate in $17.02 this year. I'll just highlight a couple of items on the balance sheet. You'll see that the IFRS right-of-use assets increased slightly from $3.1 million to $6.3 million. Again, that's the accounting treatment for the renegotiation and extension of the generators online. So that's just brought into that account, and you will see that a reciprocal increase in the IFRS liabilities. Current assets of $35.2 million comprises roughly $30 million of diamond and other inventory and then some of the receivables of $4 billion to $5 million, which maybe comprises back refunds from the LRA. Receivable -- income tax receivable of $2.3 million. Our taxes paid during the year related to the profit that we generated in the prior year. Unfortunately, we couldn't have reduced the actual obligations this year, even though we had a slightly lower profit position, and therefore, we had to make the full payment based on 2021. And therefore, we've got a refund which should be refunded once our tax return is submitted at the end of quarter 1. Interest bearing loans and borrowings, you'll see $5.9 million. That relates to the primary crushing area debt facility we got in place, and that's the initial drawdowns to fund the project, which will be completed sometime in H1 next year -- or this year, sorry. And we will have a balance to draw down before we start paying that at the end of the year. Noncurrent liabilities again, just mainly relates to the rehabilitation provisions we've got in account which seems the major portion there. But you'll see that also now includes Ghaghoo's rehabilitation provision, which would have been disclosed separately as a single life of mine item and assets available for sale last year. Then just moving on to cash management. There is a table of our corporate costs on the top here -- on the top right-hand side. So we've looked at managing our corporate costs. We expect we can keep them as low as possible. And as mentioned, made a jump from last year to this year is the increase in our insurance premiums. There's cash waterfall, which shows how cash has moved from the beginning of the year of $31 million to $9 million at the end of this year. We're seeing obviously generating a significant portion of cash before its investment in waste, 10.2 million tonnes at $48 million. We incurred $12 million of capital, which comprise the primary crushing area project, PCA project at $7.8 million. There were some Patiseng Coarse Tailings Facility work conducted of about $300,000. The underground study had commenced as well, and we've spent just under $1 million on that. And we've done some further drilling -- core drilling program of about $600,000, which is included in all those numbers. And if I look at just dividends and share buyback, we did a share buyback program during the course of the year prior to the AGM and we paid a dividend of $0.27 per share loss based on the 2021 results and all of that together amounted to $5 million. If we just then move on to the Letseng 2023 guidance. We put on the production plan for 2023 waste stripping, as Brandon alluded to, will be circa $10 million tonnes per annum in the short term. So we've got guidance there from $9 million to $11 million or treated. And you'll see we've got $5.1 million to $5.3 million. And that takes into account now that there is no fit contractor, which -- the full impact for the year will be included in that. And then we've also included some of the impact on the load shedding. And although we haven't lost significant time or production due to load shedding, we have had -- lost some tonnes during the course of the year with changeover, sometimes the scheduling, sometimes the timing of the load shedding not being adhered to. And therefore, we do lose from time to time some production through that. So that is the revised position. Taking into account the rest of the metrics and especially with costs, and we've now factored in the current existing diesel price. Obvi1ously, those are risks and opportunities for us. Diesel price in our current plan is running at ZAR 20 a liter. Last year, this time, the diesel price was ZAR 11.50 a liter. And we have seen the price go up as high as ZAR 22, ZAR 23, but we seem to be getting a trend of reducing at the moment. But those are the significant inputs, load shedding, quantum of diesel, price of diesel being incorporated in this cost -- forecast for now. With that being concluded, and Clifford, I'm going to hand back to you to do the focus areas of 2023.

Thanks, Mike. Next page, please. On the operations side of things, as we mentioned, the mine planning continues at pace, morphing into the Underground Feasibility Study during the course of the year. That will be complete, and we will then be in a position to make some decisions based on the feasibility study that is progressing well and is on track. We are going through a process which was launched a couple of weeks ago, looking at all excess staffing complement that we have and that project will take 3 months, perhaps 4 months and then that will be complete. It will result in a number of people exiting the business. PCA replacement project will be complete as well. And also the surface mine project is up for decision-making, whether or not to implement that. On the working responsibly and social life to operate color, you will see the various focus areas there, nothing to highlight. It's business as usual. That's with a focus particularly on safety. This is something which is always ongoing. And if one leg does slip, you pay the price, I'm afraid. Turning to the last column, our future. The Resource Statement, a lot of work has gone into that. It's moving towards finality. Drilling in a constrained area such as the Satellite is quite difficult to fit it in between production operations. And so that has constrained us a little bit, but we are getting to the end of that program. On the premium luxury brands, bullet point, we continue to supply into that with good results. We do have a plan to expand that, and that is growing well. We are constantly looking at expansion opportunities. We look for other ore bodies, and we assess -- regionally is really where we are focused on. So far, we haven't identified anything that we would like to bring to shareholders' attention as strong possibilities, but there certainly are many things that we keep turning over. As far as decarbonisation is concerned and the lower carbon footprint, this is a matter which receives a lot of attention, and we are, I'm pleased to say, making very good progress there. We -- on the bottom, the renewable energy bullet point. A lot of effort has gone into assessing the various options available to us, consult -- engineering consulting firm has delivered its first phase of its report. Indeed, there are many opportunities that will come with pluses and minuses. And so we are looking at this very carefully because what is clear is that the [indiscernible] electricity supply situation is not a problem which will be resolved soon and therefore, we're going to need to have alternatives. With that, I'd like to move over to the Q&A part of the presentation. And so, if we could deal with that, please, if you could put any questions up on the screen.

[Operator Instructions]

I see there's a question from Kieron. Could we comment on the M&A activity in Canada primarily on the price page? And how that tallies with the low valuations for African producers? Kieron, I can't comment on the price. It was noticeable for -- as you put it, the price paid in comparison to the valuation of African producers, we haven't done any detailed analysis of this. We will, after our results are behind us. But it is interesting that there is now some activity starting to emerge. And I think you're right to draw attention to the difference in metrics, which must have been used, and that's very interesting. The next question from Anthony. How do I explain the drop in the share price? And is this trend expected to continue? Anthony, I can't explain that. Our job, I think, is to deliver results, earnings and to communicate what it is that we are doing. We don't set the share price. Share price is set by the market. And I think it is frustrating for us as it is for you. We as management are all shareholders too. Mike, should investors expect that the capital requirements to come Cut 6 of the underground would mean that they should remove expectations for a dividend? I think that's -- it's a good question, Kieron. Our intention is always to pay a dividend or to do share buybacks or to do the combination. And we certainly would like to pay a dividend when we can. It's important for shareholders, and it's important for management too. So I wouldn't as a blanket position remove it from expectations. [ Mark Sanches ]. Are we concerned that Gem could be a target for an opportunistic takeover given the weak share price? Indeed, I think it certainly is a target, and that may well emerge. I don't think there is anything we can as a management team do about, other than do our work. And of course, the market must set the price for the business. Your second question is, have we been approached? There have been some discussions over many years of various combinations and various potential, but all that quite a high level. And so, we can't comment on that. Why is management not buying shares? I think we have been buying shares. Share buyback certainly has occurred. And so I think that's the answer to that. Ghaghoo is the expectation for the cash burn. Similar would have increased. But we've had -- we've pursued a number of strategies to sell Ghaghoo. And indeed, we've entered into agreements for sale. Purchase are actually final to perform. And therefore, we were left with the ownership of Ghaghoo. It is that we do have another proposal on the table, which we are setting at the moment, actually, a number of proposals, one more developed than others. And then indeed, we also have the opportunity to shut down the assets and hand it back to the government, and those discussions are well advanced too. So I think the answer to that question is that the cash burn will diminish, if not be extinguished in 2023. Potential growth opportunities available to Gem beyond Letseng. We have worked extremely high in Southern Africa to look at -- well, let's start with -- in Lesotho to look at opportunities. In Lesotho, none meet the return hurdles, which we have set for ourselves and the Board has agreed inside the [ suitor ] itself. We then looked at many opportunities within South Africa. Those 2 come with various positives and negatives. But overall, there has not been a persuasive opportunity. That goes for Botswana too. In Zimbabwe there are some interesting options but unfortunately, the risks associated with doing business in Zimbabwe have not [Technical Difficulty] the returns are not being sufficient to compensate for those risks, and therefore, that hasn't been a focus area. We have spent quite a lot of time and assessed quite a number of opportunities in [ Ghana ] carat. Those are interesting as the country changes the way that it operatesm and in particular, allows mining companies to sell their product, the diamonds for more -- or closer to real value -- real free market value. And the result of that as well as removing other barriers, be it work permits, be it import duties, taxes, et cetera, have made and go an attractive place to look at, and you will have seen that both De Beers, Anglo American and a whole host of other companies are now back active in the country, looking for opportunities and pushing hard. We too are in that area. There are a number of projects we are looking at. Nothing at this point is sufficiently well developed for us to approach our shareholders and look for support or what it is that may potentially arise. But as soon as that happens, we will do that. Right. Any other questions I can usefully answer this appointment, please? No? Okay. Well, thank you very much, everybody. Thanks for your attention and appreciate you being on the line.

Ladies and gentlemen, that then concludes today's conference. Thank you for joining us. You may now disconnect your lines.