Good morning, ladies and gentlemen, and welcome to Gem Diamonds' half-year results presentation for the six months ending 30 June 2024. Our presenters today are Clifford Elphick, CEO of Gem Diamonds, Michael Michael, CFO, and Brandon de Bruin, the COO. Please note that you are able to pose questions using the Q and A function at the bottom of your screen. All questions will be answered at the end of the presentation. I will now hand over to Clifford. Clifford?
Thanks, Janine. Good morning, everybody, and thank you for attending this half-year report, of Gem Diamonds Limited. If you'll turn over the page, Janine, to page two, the disclaimer, and then on to page three. This is a snapshot of the half year. If you go to the top left-hand box, a good half year in terms of carats recovered. A dollar per carat at $1,366, I think will be a big part of the discussion, and we'll talk about this in some detail. This is more or less what we achieved in the previous six months. But of course, the diamond industry pricing is under pressure, so we are delighted to have achieved this dollar per carat. That gives us a revenue in the top right-hand box of $78 million, and that flows down to EBITDA of $19 million.
And of course, the rest flows. Net debt of $8.4 million, and underneath it, bottom right, we've got undrawn facilities available to us. The debt, we've managed to pay down quite a bit of the debt which we took on in respect of acquiring the mining fleet. You will recall, at the beginning of the period, we closed a transaction, and acquired mining contractor's fleet. The mining contractor was the Prime Minister of the country, and obviously, huge conflict of interest there. So we're pleased to sort out that problem. The overall injury frequency rate, at 0.6 is up and not good. But Brandon will talk about that. Actually, minor injuries report in here is a bit frustrating for a management team to have to report this number. But anyway, we'll give you some detail on that.
As far as the decarbonization is concerned, we're well on the way towards achieving our goals. If you turn over to page four, please. The diamond market, it's no secret, is under huge pressure and continued and sustained pressure. I think a high interest rate environment for a sustained period of time has caused significant difficulties, but there are all sorts of other reasons too. The tensions, the wars in the Ukraine as well as in Israel. And those are both important parts of the diamond industry, has caused uncertainty. But the main factor, t here are two main factors, in my opinion. It has to do with lab-grown diamonds eating away at the bottom end, and the fact that China seems to be muddling along, and clarity in respect of getting out of the difficulties which they face economically, that clarity doesn't seem to be emerging anytime soon.
The diamond market itself, particularly at the bottom end, I'm talking goods of $200 per carat and less, are unfortunately struggling. I think that the June, July period, there were further price drops. That has led, of course, to various participants and including De Beers, Alrosa, postponing sales, in an attempt to dry out an oversupply situation. Petra and ourselves too, didn't sell in July and into the back end of August. But some of that supply is now coming on stream again, not De Beers, I'd say, but the rest. Unfortunately, the impact on the lower end does, to an extent, drag down prices at the higher end. And I have to say that, some sales process of some of our competitors is at best questionable, and is impacting our prices too.
On the other side, I would say that the ultra-high-end brands are really promoting diamond jewelry lines, and they are doing well, and they are expanding their business. We anticipate that as their stock gets diminished, they're going to come into the market and in particular to suppliers such as ourselves to replenish those reduced stocks in due course. I can't forecast accurately at all whether that happens towards the back end of this year or into early next year. But we are now at that time of the year when traditionally sales are robust because of suppliers into manufacturing for the big selling season of Thanksgiving into Christmas and New Year. We remain one of the highest dollar per carat kimberlite producers. And we are working with brands in order to get additional value for our goods other than just selling them as rough diamonds.
It's a gloomy time for the diamond market. There are some bright spots which relate mainly to how well the brands are doing in their part of the diamond industry. But it is a case that you will have seen that some mines are taking action. And in particular, you look at Lesotho, four diamond mines there, three of them are in various stages of slowdown or care and maintenance. And I suspect this is going to flow out to the rest of the industry, and similarly, we're going to have marginal mines which are under pressure having to deal with the lower prices. We can move on then onto sustainability. Brandon, if you'll deal with this, please.
Thank you, Clifford, and good morning, everyone. In light of what Clifford has said in terms of the market, I am pleased to say that we had a good half year in terms of operations and starting at our number one priority, safety. Overall, we maintained a good safety performance in H1 2024, and this is seen in our all-injury frequency rate of 0.6, again, tracking towards another record year for all injuries compared to previous years. As you can see, in 2023, we had 0.67 overall, and we currently at 0.6. It is unfortunate as Clifford said and frustrating that we did experience three LTIs in Q1, zero in Q2. There were no serious consequences for the individuals and all are back at work. Investigations were concluded and further controls and consequent management implemented. This does impact our lost time injury frequency rate significantly for two reasons.
One, we are comparing three injuries in H1 2024 to two injuries for full year 2023. The second impact is we have had a significant reduction in our overall man-hours following the right sizing of the workforce in 2023. We have had a 21% reduction in man-hours, which will then as a denominator to that calculation, impacts the overall outcome. Unfortunately, H1, we saw an increase to our LTIFR to 0.36 from 0.1 last year. Going forward, we hope to maintain our good safety record and aim for no further injuries and especially LTIs for the rest of the year. There have been no major or significant environmental incidents and no major or significant social incidents either. A good safety report.
In terms of sustainability, which is key to our long-term success of our business and is now deeply integrated into our way that we operate at each of our operations. Our CSI initiatives which focus on education and infrastructure in SMEs and is based on our long five years CSI plan following a full community needs analysis that was completed in 2022, is tracking well. Our tailings facilities are well managed and are in good condition and are appropriately aligned to the GISTM. I am pleased to say that the bioremediation plant after a challenging start is starting to perform well, and we are seeing good results in terms of productions of nitrates, which is a byproduct of, in particular, blasting and dumping of that material. We are starting for the first time to release clean water post-treatment through that plant.
We are tracking well towards our decarbonization target of 30% reduction by 2030. In H1 2024 versus H1 2023, we saw an overall carbon emissions levels at very similar levels. What we have seen is that we had a significant reduction last year through volumes decrease and through internal initiatives that have reduced the carbon emissions. This year, we saw a swap around between our Scope 1 and Scope 2, and really that was materially as a result of lower diesel usage in our generators due to decrease in load shedding. On the other hand, we had increase in Scope 2 due to higher availability and use of grid electricity. Overall, we saw very similar level, but we are tracking at about 25% below our 2021 base rate.
Again, we are continuously working to integrate eight of our adopted UN SDGs, and that work continues in our focus on sustainability. Janine, you can turn the page to our operations review. Focus for H1, as we have done from the beginning of 2023, is on operational efficiencies and cost containment, and we continue this focus with vigor. Our mining operations are going well following the insourcing of the mining operations, and we have had no interruptions or disruptions to mining. We are seeing a lot of benefit there from a control perspective and from a cost perspective. You will notice that we have reduced waste mining, and that is due to two things.
One, it's in line with our long-term mine plan. The second thing is that our ore availability for the year-end treatment is in line with our plan. Therefore, we are able to reduce waste mining with no impact on our long-term mine plan. We've had excellent plant stability through our reduced feed plan that we implemented in August of 2023, and we're starting to see significant benefits from that. We also changed our blasting strategy to get better fragmentation. The implementation of the PCAs, the primary crushing areas, has also improved fragmentation into the plants. This is shown over the period of H1 2024 as good higher overall plant utilization and significantly improved diamond recoveries, which I'll cover on the next page. Our tonnes treated remains stable at about 2.5 million tonnes for the period. Carats recovered.
It's very pleasing to see that our overall carats recovered was good over the period. We are at the moment exceeding what we expect from the resource, and we're seeing that from a number of inputs. One, our resource seems to be performing better than expected. We've got better fragmentation, as I've just explained, in terms of our blasting and crushing, and we've slowed down the plants to a rate that results in more stability for the plant and more consistent uptime and runtime of the plants. This has resulted in good carat production for the period, and the recovery of a lot more large, high-value diamonds, including 8+ 100 carats in the first half of the year, and two more have subsequently been recovered in post-June. We've also recovered one area where we are focused on is also the 60-100 carats.
You'll see there's three recovered in the period. We've covered a further two post the period, so we're in line with our full year averages since 2008.
Right. On the sales and marketing, as I said, you'll see that the $1,366 per carat compares favorably with the first half—well, with the entire year for 2023. So, a good situation. We've managed to hold the fort, as it were. Of course, you will know that in the industry there've been significant price drops. So, pleased about that. Brandon talked about the good large stone recoveries, and of course, that has helped. Some of the most well-known premium luxury brands are starting to work with diamond manufacturing companies who are amongst our biggest clients. Those orders, purchases to order are growing. As the brands get more and more comfortable, the advertising which they're putting behind their product is working, and they're starting to reap the benefits of that. So increased confidence in our goods has come through, and so we are pleased about that.
But it is a tough time out there. We are very grateful that the biggest producers, De Beers, Alrosa, who account for the lion's share of supply, have not sold goods and have entered into arrangements with their customers not to be forced to take goods. Everybody's been on holiday in the main manufacturing centers. So we think that September is going to be an important month for the diamond industry. It's going to be a month that we are watching closely. We ourselves have a very good parcel of goods, which is going onto the market quite soon. And we're going to be focused on that. We have no difficulty selling our goods, of course. Highest quality goods, the best goods. As you will see from the next page, some photographs of really quite outstanding and magnificent recoveries.
I would like, though, to just end this section of the presentation by saying what a delight it was to see the magnificent 2,492 carat recovered by Lucara, the second-largest diamond ever recovered. 1905, I think, if I'm correct, the Cullinan was recovered, and then this now, some 120 odd years later, has emerged in Botswana. And it's just a pity, frankly, that Lukas Lundin, who was the real driving force, obviously put the capital up and in various tranches for the Karowe mine. But from a diamond industry point of view, it's a simply amazing thing to have seen, and congratulations to them. I must say it was with significant envy that I saw the announcement because we also play in that space. But that is just on a completely different league. And I hope one day myself to see that diamond. Mike, over to you for the financials.
Thank you, Clifford. Good morning, everyone. I think taking into account the backdrop that Clifford has talked to in terms of the diamond industry and the market conditions, and again, making reference to the dollar per carats in terms of achieved for this year of $1,366 and very similar to the prior period of $1,373. The positive results we've generated is off the backdrop of the positive operational efficiencies and the cost containment that Brandon presented. So taking into account the carats that we sold during the period, 56,994 carats, and that's against 52,163 of the prior year. Significant increase, but a similar dollar per carat has resulted in a 9% increase in overall revenue, taking us to $78 million for the period.
Royalties, as you're all aware, is paid to the government of Lesotho, and it's based on a 10% charge in terms of revenue, together with some of our sales and marketing costs for the operations in Belgium and the tender processes we manage there. I'll get into more detail in the next slide or so on the cost of sales, but you can see there's a further 8% reduction there. And again, that's driven by predominantly better or less load shedding and better grid availability, therefore reducing diesel reliability. So we've had some efficiencies there. The impact of the insourcing of the mining activities as well has had a positive effect, and we're seeing a reduction in managing that on our own, on an owner-based basis versus outsourced. Corporate costs, again, you can also see there's been some cost containment there.
We have had some restructuring in the past year, and that benefit is now starting to flow through into the current period. Underlying EBITDA has almost more than doubled to $19.1 million, against the $8.4 million of last year. That is pleasing for us to see the growth that we have seen in that line. Depreciation, you will notice, has increased. It has almost doubled. That is driven by the fleet that we have now purchased for the insourcing process. As a result, we are depreciating that, and therefore our depreciation cost has increased. Other operating costs, again, reduced. That is mainly the final stages of the care and maintenance on Ghaghoo. Further initiatives there have also reduced the operating costs there to an absolute minimum. So we are seeing the benefit coming through on that. Net finance costs of $3.5 million is higher than in the past.
We ended last year in a net debt position of about $21 million, and we have managed to reduce that over the period. The debt process or the debt availability we utilized during that period has been quite high, and therefore we have seen a higher interest charge in this particular period. Income tax, 25%, we pay at Letšeng, but we do not or are not able to get some tax benefits for other operating divisions that we have, and therefore our effective rate is quite high. From a cash perspective, we have paid 25% of Letšeng's profits to the government of Lesotho. Following the minority interest, which is 30%, which the government of Lesotho own indirectly in Letšeng, we end up with an attributable profit of $2 million, and that is against a loss of $1 million in the prior period.
Taking into account 140 million shares in issue, we ended up with $0.015 per share. If I then go into a bit more detail on the unit costs, dealing with operating, direct cash operating costs. Very similar tons treated. You will see 2.5 million for each period. So a very small change there, but there has been a big drop in our operating costs, down 18%. Our overall costs in this from a gross perspective dropped from LSL 731 million in the prior period to LSL 619 million, a 15% reduction overall costs. That has taken us to LSL 243.84 per ton treated. Non-cash accounting charges that comprises waste, capitalized, and amortized inventory movement and stockpile movement. The increase this year is predominantly impacted by last year's reduced cost. In the prior period, in H1 2023, we had a significant buildup of our stockpile.
We started the period in January 2023 with 700,000 tons on our stockpile, and we took a decision to increase that to 1 million tons for insurance and business continuity purposes. As a result, we had a lower cost coming through the accounting charge adjustment. In this period, we have had a very similar level of stockpile. The stockpile is currently sitting at about 1.1 million at the end of June 2024. You will see the average exchange rate slightly better for us. So we have had an improvement in our dollar-reported costs based on that. Unfortunately, we are seeing levels currently of about 17.70. So that could impact us if it sustains at that at our reported costs for the full year. Total operating costs, therefore, in dollar terms, dropped 11% to $1,836.
On the waste side, again, we had waste tons of 3.2 million versus 4.5 million, so a 35% reduction, and that's in line with the operational requirements that Brandon presented earlier. Waste ton cost dropped from $309 million to $189 million, and that's driven by volume and lower costs that we're able to execute based on an in-source basis. And there you can see we've had a 6% real reduction in our cost, down to LSL 59.94 versus LSL 63.80. Again, taking the exchange rate into account, our U.S. dollar-reported cost has dropped to $3.20 from $3.50. Just on the next slide, then slide 16, the financial position. There's no material movements affecting our balance sheet. The closing rate in rand to dollar terms in 2024 was 18.26, and that's how we've converted all our local-based assets and liabilities, and that's against 18.89.
There was a movement in that of some LSL 60-odd , but no material effect on our overall balance sheet. The one thing I would like to highlight is that you'll see our cash has gone up to $30 million from $16.5 million, and our interest-bearing borrowings remained at $38 million compared to the previous period of $38 million. We didn't have the opportunity to convert or settle some of that debt using the excess cash we had, and some of that was settled after period end, so the debt was reduced by $13.6 million during July. Part of the debt structure at $38.3 million is made up as follows. We had $21.5 million in revolving credit drawn down, and of which $13.6 million I mentioned has been settled since then.
Then we have two longer-term facilities, the primary crushing area of $6.2 million, which is payable over a longer period, and then the newly acquired fleet that we refinanced, and we've got a $10.6 million debt there. If I then move just on to slide 17, just to look at how our cash has flowed over the period. As mentioned, we have got $30 million cash. Our net debt, taking into account that position, is $8.4 million versus $21.3 million. So that's a big improvement in, or pay down in terms of our debt facilities. And we have undrawn facilities of $54.9 million. Our revolving credit facilities are due to expire in December 2024. During this last six-month period, we are engaging with our lender group as to the extension of that facility or rollover.
We have certain options in that facility, and we have subsequently or recently executed the option to roll over our facility for a further two years, and we're engaging with our lenders on that to try and conclude that in the next two or three months. If you look at our cash flows and the movement during the period to show how we've moved from $17 million to $30 million in cash, it's then generated $44 million of free cash. We received a tax refund which was due from last year. We overpaid tax because of the provisional basis and the method of requiring to be paid, and we were pleased to get that refund in Q2 which assisted the tax management of that obligation.
Working capital, you will see had an impact of $13 million, and included in there was a significant portion payable to the mining contractor for the last tranche of the payment of the acquisition of the fleet. That was paid in January, and therefore we have had a big working capital movement. Waste cost for the 3 odd million tons that we spent has been capitalized at $12 million. We capitalize all our costs on waste, and then we amortize it into the income statement when we treat the ore that that waste liberated. Corporate costs of $4 million and the rest of the cash flows comes directly from that income statement, resulting in a $30 million cash on hand at 30 June. On the last slide, taking into account the improved recoveries and better performance and the decision to
To optimize costs and reduce waste, we have issued renewed guidance, and there are three key elements of that needs to be highlighted. Waste stripped has dropped from 6 million tonnes to 7 million tonnes, down to 5 million tonnes-6 million tonnes, and that takes into account that change. Carats recovered. We previously had guidance of 88,000-92,000. We have increased that to 98,000-101,000. Carats sold, which flows from that, which previously was 91,000-95,000, has now gone to 100,000-103,000. We believe that is a positive change in terms of our outlook for the rest of the year. That is it on all the financials. Clifford, over to you.
Thanks. Just to summarize, I think it is fair to say this is a good performance under difficult conditions. The outlook is a bit tough, but let us see how we can deliver at the end of the year. A couple of questions. Can you advise how CapEx changes ahead? We will talk about that. Also the shares trading below cash from ops. Can the company consider a buyback? Okay. The other one. Highest volume in four years. It would be great to see the directors buy some shares. All good questions. Right. CapEx. Who is going to deal with that, Mike? You or Brandon?
Yeah. Thanks. In terms of our CapEx changes, we have very low CapEx this year. Our major projects were concluded last year with the PCA and the bioremediation plant. There is some overrun into this year. However, most of the CapEx for this year is stay in business. The primary project at this stage is just getting the Patiseng Extension Project, which is our tailings facility, and there are a few other smaller CapEx charges that we are looking at, improving the recovery and a few projects that have been finished within that overall project in year to date. That is also being looked at, but that is the capital we looked at. There is nothing more.
Yeah. Maybe just to add, in light of the questions on the guidance, total capital spend guidance is $5 million-$7 million. We are hoping to get that to trend to the low end. We have spent roughly about one, just over $1 million at half year. So for the balance of the period, you are looking at roughly another $4 million in H2, subject to the usual scrubbing process as we go before we approve capital.
The second part of that question about a buyback, given the level of cash and available facilities, et cetera. It is a logical question. It is obviously a good one. The point, though, is, it is quite stormy out there for the diamond industry. I think, we would like to see how the market opens up in September, and then into the major buying and trading towards the back end of the year. We always keep this in mind, as dividend too. We are well aware of it. We are certainly not going to be doing anything in the immediate future because, as I say, it is choppy waters out ahead of us. The directors buy some shares. Yeah, good question, too. I will raise the point with all of the directors and say that this is something that has been raised and hopefully, they also see value.
Perhaps something is going to happen in the near future. So that is those two questions. Are there any other questions I can deal with?
It does not look like we have received any further questions.
Let's just hang on 30 seconds or so. There may be somebody who'd like to put something up. All right. It looks like that's it. Thank you, everybody. We appreciate your time. We appreciate your attendance. I think this works well. And of course, if any of you would like to ask questions which are not appropriate to go up in a public forum, Mike and Brandon and I are always available to take a call and to discuss anything further. Thanks, everybody, and goodbye.
Thank you. Thanks, Janine.
Thanks.