Ladies and gentlemen, welcome to Gem Diamonds full year results presentation for the year ended 31 December 2025. The presenters today are Clifford Elphick, CEO of Gem Diamonds, Michael Michael, CFO, and Brandon de Bruin, COO. Please use the Q&A function at the top of your screen to send through any questions. All questions will be answered at the end of the presentation. I will now hand over to Clifford.
Good morning, everybody, and thank you for your time. Thank you for your attendance. As you can see, this is the 2025 Gem Diamonds annual report and accounts presentation. If we can turn over the page, please. The disclaimer, I am sure you are all very aware of all of this. Let us not dwell on this. The next page, please. Right. It is me, Michael, and Brandon. You are all familiar with us. Let us look at the year in review. We recovered some 90,000 carats. That is a little less than a normal year for us. That is based on the ore mix. It was what was anticipated from the ore which we processed. On the dollar -per -carat side, $1,100 per carat achieved for the year.
Again, this is a little light from our normal dollar per carat, and that is also a reflection partly of the ore provenance, main pipe versus satellite pipe, but also, of course, the ongoing pressures on diamond prices. That led to a revenue of just shy of $100 million. It was a tale of two halves, really. The first half of the year, under sustained pricing pressure, we were in a negative EBITDA loss. Very happy to have turned that around to a positive $4 million EBITDA for the year. That was really a good effort. We have a basic loss for the year before pre-exceptional items, and Michael will talk to that in some detail. Our net debt finished the year at $20 million.
We are quite pleased with this because we generated quite a lot of cash during the year and were able to reduce this debt by some $8 million. Our all injury frequency rate, this is at a very low level. We are very pleased with that, as you will see from some graphs further on. We have achieved our decarbonization target well ahead of the schedule which we had set ourselves. Again, that is something that we are well pleased with. Our facilities remain. We have some facilities of some nearly $70 million available to us. That is the snapshot of the year. Let us go into some more detail. Talking about the world as a whole, the economic backdrop, 3.2% growth for 2025 was not bad, and also China, although some doubt about the 5%, it seems that they did meet their target.
There's a slight change in attitude in China towards spending money on diamonds. It's starting to happen, which is good news. The tariff and the geopolitical tensions during the year really created substantial uncertainties. Lack of confidence and uncertainty doesn't help us in the diamond industry at all. Of course, the war, first in June, the attack on Iran, and then subsequently, towards the end of the year, things obviously getting tough. All of this from a global economic backdrop was really not helpful. Turning specifically to the diamond market, the year was a tough one, with continued pressure on the rough and polished diamond prices. You will all have seen the major, De Beers, but also junior diamond producers, all of us under significant pressure because of these pricing issues.
What is starting to become apparent, the industry is at last grappling with this distinction between synthetic diamonds and natural mined goods. The advertising campaign has begun, work is being done, and many of the midstream traders, manufacturers are running their own campaigns and talking about the distinctions. You're starting to get a clear distinction emerging between two basically different products. One is a very inexpensive product. You buy it, you walk out of the store, and you have absolutely zero value in your hands, as it were. The other, of course, is natural, is more expensive, and retains value. On the other hand, we saw that the ultra-high-end luxury brands, we're talking Van Cleef & Arpels, Tiffany & Co., LVMH's top-end jewelry. They all had very good years. In particular, the Van Cleef & Arpels results stick out.
We focus on that a lot because we supply into their programs, into their needs, and it's been quite interesting to see decimation at the very low end, the poorer quality, smaller goods. Yet at the top end, there's been this positive movement. Our position is as the top end in the kimberlite producers. We believe that we are well-positioned. We've seen price increases starting in the fourth quarter of 2025. We started to see a shortage of goods in the market, and our customers were bidding up. We have seen that continue into the first quarter of 2026. That is a cause for some optimism.
As a result of the difficulties which we were experiencing in the market, and therefore the need to look after our balance sheet, look after our cash position, not squander any money, we entered into what we termed the Business Resilience Programme. This was, I think, extremely well-executed. It took a short time to complete the planning for it. We implemented it, and within months we were starting to see the benefits of that resilience program implementation. Of course, given different pricings, and the pressure which the industry has been under, we look at our long-term mine plan at all times, and we have to optimize and shift the delivery of ore. We're fortunate to have the two pipes. It does give us a measure of flexibility. Not complete flexibility, but a measure. That is the position as far as Gem Diamonds is concerned.
Let's turn over, please. Let me just speak a little bit about this program, then I'm gonna hand over to Brandon. As I said, when it became clear that we had to react quite aggressively to what was confronting us, it really was a question of rapid action, with those two, conservation of cash and the balance sheet protection at top of mind. We immediately accessed some additional higher-value satellite ore, and reduced the waste mining volumes. That obviously increases revenue, reduces costs. Unfortunately, that was not enough, therefore we had to rationalize the workforce. We held a situation where the board and senior management agreed to salary sacrifices, and also we slimmed the board down, because in a small company such as ours, that is a dead weight, as it were, from an expense point of view.
Obviously, there are many positive things which come out of a listed board, but it was appropriate to slim this down as far as we possibly can and within the limits of stock exchange regulations. CapEx was scrubbed, all CapEx, and we look at that and turn it over time and time again, and essential CapEx is done. Non-essential and longer-term CapEx was put on hold. Of course, the obvious thing was to relook at all of our supplier contracts, and just renegotiate and renegotiate and push and shove. This resulted, as you can see at the bottom of this page, in monthly savings of $1.5 million. It allowed us to build cash in the second half and reduce our debt by some $8 million.
The EBITDA turnaround of $6.5 million resulted in a net EBITDA for the year of just under $4 million. And, we got some additional revenue from satellite pipe ore. So this was a reaction to those situations. I think I'd like to say it was very well implemented rapidly and decisively, and we were very happy to see the results which emerged. Brandon, will you take over, please?
Thanks, Clifford. I agree. I think, rapid change in management and work in the H2, taking into account the challenges we saw in the H1, particularly with price, had a driving impact on operations. But we'll get into those over the next few slides. Starting with our priority, which is our safety. Very happy to report an excellent safety performance in 2025 with zero fatalities. We have, again, for the second and third year running, had record low AIFR of 0.41, our injury frequency rates. And you can see here in the graph, a continuous downward trend, which is what we're driving towards. Only two LTIs in the year give us a very low LTIFR ratio as well. That was against three LTIs in the previous year.
All the efforts that we've introduced and mine plan changes and management changes that we did in H2 to reduce costs and contain spending, we continued our focus on safety and had good outcomes throughout the year. We had no major significant environmental incidents and again, no major significant social incidents and had very good efforts with our communities. If you turn the page to sustainability. As Clifford mentioned, we have reached our 30% reduction in carbon emissions in our Scope 1 and 2 reduction, which is off-grid and diesel power in particular. This is largely based on reduction of volumes, in particular on waste mining, so that had an impact on our Scope 1 reductions. But also there were a number of energy efficiency initiatives that have been implemented over the past few years, which have added to our reduction in our emissions.
Our focus going forward is to maintain this 30% reduction in Scope 1 and 2 carbon emissions against our 2021 baseline. As you've seen in the mine plan that we released to the market in September last year, there is an increase in waste tonnes coming in 2027 and 2028. That is as we introduce the next cutback in the satellite pipe, there will be an increase in waste. Notwithstanding that, our focus is to maintain a 30% reduction in our Scope 1 and 2 emissions. Our CSR projects, I'm pleased to say that notwithstanding the challenges that we faced last year, just from a financial perspective, we met our obligations in terms of our mining lease and our obligations to the Kingdom of Lesotho. Our focus on CSR projects was on education, infrastructure, and SME development, and that went well last year.
Our residue tailings facilities remain well managed and aligned to the GISTM and remain top class. No concerns. We retained our safety and environmental ISO 14001 and 45001 certification, and this we've managed to do since 2018 on an annual basis following the relevant audits. We also retained our FTSE4Good status, and our integration of our eight adopted UN SDGs. We recently completed a gap analysis to ensure we are contributing meaningfully to these goals, and I'm pleased to say that our efforts are contributing meaningfully. You can flip the page. As mentioned, operationally, 2025 was a very positive year. In particular, building the changes that we implemented in H2 saw very positive results from an operational perspective. 2025 was our first full year of mining and treatment being insourced, and we're certainly seeing the benefits from both a cost and operational efficiency perspective.
We adapted our mine plan in H2 last year to manage the prevailing economic conditions. With most of the value of that coming out from a reduction in waste through the redesign of the final cutback in the main pipe, which is Cut Four waste. Also a deferral of waste mining in the satellite pipe for two reasons. One, we introduced additional satellite ore, as Clifford mentioned, in 2025 by extending the current cutback, and we therefore had the opportunity to push out the commencement of the next cutback while we finish the extension in the Cut Five waste. So that allowed us to contribute a significant amount of additional satellite ore in 2025, which was listed in our results, in our revenue, in particular in H2.
The deferral and redesign of the cutback and the reduction of waste has not impacted our ability to ensure that we maintain our 5 million tonnes per annum of ore availability. As Clifford mentioned, that is mainly due to the flexibility or the limited flexibility that we have with two pipes and the redesign in the mine plan. As you can see, our waste tonnes in the graph, our waste tonnes reduced to approximately 2 million tonnes last year. We maintained 5 million, and in fact in 2025, 5.2 million of treated ore throughout the year. From a treatment perspective, our focus was on a consistent feed rate to the plant. We changed methodology there during the year by introducing front-end loading into the plant, which provides a consistent feed.
That allowed the plant to continue to run stably and increasing operating time while maintaining a consistent run rate. We had good operational efficiencies in the plant and the feeding to the plant. We also managed to reduce treatment costs following insourcing significantly, and this added to the numbers that Clifford mentioned in previous slides in terms of our monthly savings. Our long-term mine plan, we optimized that and then released it to the market in September. There was a change to our main pipe mining, which reduced the waste of mines, and then also bringing in additional satellite tons. Those we continuously look at and in particularly in the prevailing economic conditions, we will continue to do that and be flexible to ensure that we are able to move and change things as we need. Next page, please, Jannine. Thank you. 90,000 carats recovered.
This was in line with the grade expectations and the ore mix. Different to previous years, our ore contribution from satellite pipe reduced to 26%, which is well below previous years in terms of the contribution. The satellite pipe has got a higher grade, which means more carats, and it has got higher value. The main pipes are a lower contribution, but that does impact on our grade and value. We did recover nine greater than 100 carat diamonds. Unfortunately, we assume most of them came from the main pipe, given the overall quality of those diamonds was not at the standard that we usually see from satellite pipe. In the table below, we can also see in a couple of the size categories the impact of lower volumes on satellite pipe and lower grades.
On the whole, a pretty good performance from the recoveries that we did get out of the treated last year. With that, if I can hand back to Clifford for the sales and marketing.
Thanks, Brandon. If you look at the graph at the bottom, it tells the story of a decline in average dollar per carat as a result of all those factors we spoke about before, and in particular, the onward march of synthetics into the diamond industry. What I would say is that the last quarter of 2025 saw a pleasing turnaround in this. This is obviously the average for the year. Pleasing turnaround in this, and we've seen that continue in the first quarter of this year. So the average dollar per carat for our goods is really now in a different place to what this is for the year. I am hoping that as the year goes on, we will see that this was the bottom of the market, as it were. The detail in the bullet points, nine diamonds greater than 100 carats were recovered and sold.
From the previous chart you saw, that was pretty much on average. 14 diamonds sold for more than $1 million, and 22 diamonds for more than $20,000 per carat. If you look at the pie chart on the bottom right, you can see that some 73% of the revenue at the mine was from the greater than 10.8 carats, large diamonds, and of course then the 5 -1 0 carats. So our mine, and the point of this is to try and make the point that we find ourselves in a slightly different category to most normal diamond mines. If you look to the future of higher priced, higher quality goods doing well and not suffering under the same yoke as synthetic diamonds have done at the bottom end of the market, I think this is quite an important pie chart to look at.
Let's keep going. Right. Michael, over to you.
Thank you, Clifford, and good morning, everyone. As you can see on the income statement here, we've displayed this now in three columns with a separate column for the exceptional items, which I'll talk to shortly, and what Clifford alluded to on the overview slide. But firstly, I want to concentrate on the first column, our operating results under normal trading activities. You'll see that our revenue drops to $98.4 million, $55.5 million lower than the previous year, driven mainly by the reduction of carats, which we've spoken about in Brandon's section. Again, driven by a lower satellite contribution, 26% in the current year versus 44% in the prior year. And we ended up getting 88,380 carats available for sale versus 109,967 in the previous year. So a volume reduction had a significant impact.
Simultaneously, though, our dollar per carat got to an average of $ 1,105 per carat versus $1,390 per carat. That was all the other aspects under the marketing section that Clifford alluded to. Royalties and selling costs represent 10% royalty to the government of Lesotho, plus sales and marketing costs in Belgium. The lower amount dropping from $ 16.5 million to $ 5.9 million, driven by the lower revenue, as the royalty is a variable of that. We are also grateful to the government of Lesotho for giving us a remission of royalties for the last four months of the year, which contributed to reducing that cost and assisting with some cash flow.
Cost of sales is down 30%, down to $ 83 million from $ 100 million. I will talk to costs in more detail. There are various elements to that, and I will deal with that on the next slide. Corporate costs, again, also down 27%, notwithstanding inflation of 6% in South Africa. Again, also driven by the Business Resilience Programme that implemented some salary sacrifices that were introduced, and trying to maintain costs to the bare minimum. Underlying EBITDA was the outcome there of $ 3.9 million. Again, Clifford alluded to the fact that at half -year, we were at a $ 2.6 million loss of EBITDA, and ending the year with a $ 3.9 million meant a $ 6+ million turnaround in H2. The depreciation of mining asset amortization, standard about $ 12 million. The difference there is the average exchange rate, which was weaker in the current year from a South African perspective.
Going then down there, finance costs. We were in debt throughout the year and therefore, had significant interest costs flowing through, but less than the prior year as we tried to whittle the debt down. Other income mainly represents foreign exchange gains that achieved during the year. The income tax in the current year was a positive number, a benefit charge, and that was because of the losses incurred and some of the overpayment of taxes that we had done during the period. Non-controlling interest represents 30% of the Letšeng operation, and that is the government's share in the company, that is in Gem Diamonds. Our attributable loss or net loss for the year was $ 8.6 million, and that represented into a $ 6.1 loss per share based on about 140 million shares in issue during the course of the year.
If I then go and talk to the exceptional items, there are three key areas that impacted us during the year. The first item, the most material there is impairment. Taking into account the strong exchange rate at the end of the year, 16.57, plus the market conditions in terms of our revenue profile, and running a model through the program to test for impairment that resulted in a $77 million impairment on our assets. We also had to write down our inventories. That was the stockpile. Again, that was mainly driven by the lower exchange rates, at the end of the period, and that resulted in a $ 3.5 million write-down of our stockpile. There is an income tax benefit to that, of $ 17.6 million. That is 25% that resulted in a loss after tax of $ 63 million for those two portions.
Taking into account the non-controlling interest, we ended up in an attributable loss of $ 44 million just on the exceptional items. The last item is the loss from discontinued operations. Following our relinquishment of the Ghaghoo operation during the course of the year, and abandoning that asset and being relieved of all obligations in there, we ended up with a small profit of about $1.5 million on the winding up of a company. Unfortunately, due to foreign currency translation reserves, which we have to flush through our income statement of about $ 52 million, we resulted in an overall loss from that operation of $ 51 million, all of that being a non-cash item, resulting in an attributable loss for all exceptional items of $ 95.4 million.
Taking all of that into account, we ended up the year with $ 104 million loss from operations and a net loss of $0.74 per share. If I then go over the next slide and talk to the unit costs, you'll see that we had an 11% decrease in our total direct cash operating costs, down to LSL 320 per tonne. Most of that driven again by cost efficiencies, the Business Resilience Programme in H2, and that's notwithstanding of local inflation in Lesotho of about 5%. Non-cash accounting charges also reduced by 45% down to LSL 62 a tonne, driven again by the lower satellite contribution there on a positive side. So it applies to cost. The satellite pipe has a higher amortization charge where we treat that ore, and our amortization drops to $39 million from $35 million in the prior year.
There was also an increase in inventory at the end of the year, which had a positive impact on our non-cash accounting charges. Overall, operating costs then dropped by 22% to LSL 286 per tonne, and bringing that back into dollars, it ended up at $16 per ton versus $19.98 in the prior year. Waste tons mined, you'll see there's a big decrease in the volume from 5.4 million down to 2 million. That had an impact on the overall unit cost even though we had significant saving in gross costs on waste. Our unit cost jumped up 16% to LSL 71.9 per tonne, and that was because of the fixed cost element within that structure which resulted in an increase on the lower volumes.
Again, taking the exchange rate into account, our total waste cost then increased to $4.02 per ton in dollar terms compared to $3.37 in the prior year. If I look at the financial position, non-current assets are property, plant and equipment and mining assets that dropped to $ 316 million from $ 291 million. The main impact again was the impairment of $77 million, which reduced that value down to $ 316 million. Current assets increased to $55 million from $ 40.7 million last year. Again, as mentioned, increase in inventory. We have an insurance fund where we've been building funds over for the last five years, and that matures in June, and that will give us then flexibility to draw down on that facility of about $8 million.
That now is included in current assets, which contributed to the decrease in the current assets. You will see we are in an income tax refund position this year. We have had to pay provisional taxes in the current year based on our last year profits, and our results this year were lower than that, so we will be in a refund position and hopefully receive those funds in Q2 this year. If I just then look at the liability side, you will see our interest-bearing loans increased slightly from $21 million to $24 million. That is made up of about $13 million drawn down on our revolving credit facilities. Then we have $11 million term debt on for two facilities, one being the primary crushing area and the mining fleet, which we purchased a couple of years ago. Non-current liabilities, $14 million represents the environmental obligation, as they say.
Our current liabilities significantly dropped this year because of the royalty relief we had. We did not have a royalty obligation at the end of the year, and there were no bonuses paid in the prior year, in 2025, and there was no provision in the accounts at that point in time. If I then go to our cash management. Pleasing to state that under the tough circumstances we faced during the year, we were able to still meet all our debt covenant obligations with no issues reporting there. Our group cash end of the year, $3.8 million, down from $12.9 million in the prior year. Net debt was up to $20.1 million from $7.3 million last year. Again, pleasing from half -year, we got this, which was $28 million, down by some $8 million to $20.1 million.
Available facilities at the end of the year were $68.3 million, so we still have significant access to funds. Importantly, our group facilities do expire in December 2026, at the end of this year, and our renewal process, in line with our normal arrangements with the lenders, will commence in Q2 2026. That is a key area of focus for us this year is to have these facilities renewed and available for us in the coming years. On the right side, there is a table there. I have spoken about corporate costs, but you can see how the corporate costs have decreased over time, especially from 2021, 2022, hovering above $8.5 million, down to $5.6 million as it currently stands. I have a graph, a waterfall there on the cash movement during the year.
$13 million, as mentioned, cash at the beginning of the year, the little gray box at the bottom. It is in generating operating cash flow of $41 million. You will see there we paid $12 million under income tax, $7.6 million related to the prior year, 2024 tax obligation that was paid in March this year. The remaining $5 million was paid based on provisional taxes for 2025. That is where we will end up with a refund position because we owe about $3.5 million. So we have overpaid that and reflect it on the balance sheet. Working capital increased. We had an outflow there of $12 million. Again, increase in inventory. So we have invested some in terms of our balance sheet. Then we had a reduction in our payables, as mentioned previously, which was at an outflow saving.
Capital waste cost capitalized was $ 10 million. Flowing through the rest of the items, we ended up with $4 million cash at the end of the year. The last slide then that we have is just the guidance, which will be available for review in terms of forecasting our 2026 position during the course of the year. Clifford, that's it from me. I'll hand back to you.
Okay. Thank you, everybody. Thank you for attending. There is a Q&A facility if you'd like to ask any questions, and we can respond to that. I've opened the Q&A on my side. I see there are no posts yet. Let me just wait a couple of minutes, seconds and see if anybody would like to ask a question. If there is any comments which we can talk to. No posts yet that I can respond to. As you know, you're always free to send an email or call Mike or myself or Brandon de Bruin independently if you don't want to put anything up on the screen now, and we are happy to answer that. It appears nobody wishes to post any questions. I think that will bring the results presentation to an end.
If I could just say, once again, I see there's a whole lot of people on here. Thank you all for attending. Appreciate your time and hope that what we have said puts you in an accurate position to understand the activities of the company and where the trends and the movements are. Thank you, everybody. Appreciate your attendance.
Thank you.