Today are Clifford Elphick, CEO of Gem Diamonds, Michael Michael, our CFO, and Brandon de Bruin, COO. Please note that you are able to pose questions using the Q&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.
Thank you, and welcome everybody. As Janine said, we focus mainly on the revised mine plan, and we are going to spend most of the time talking about that, but we will then move on to guidance, revolving credit facilities, and the diamond market. Will you turn the page, please? This is the disclaimer. I am sure that you all will pay some attention to that. Here is the agenda. Let us move on to the next page, please. Brandon, will you talk to, first of all, the existing mine plan and then what we have been planning to do and have now finally achieved, and then we will get onto the new mine plan.
Yes. Thank you, Clifford, and good morning, everyone. Just to kick off, our existing long-term mine plan, which you would have seen in our annual report, is depicted in the graph on slide five. The mine plan includes both Main Pipe and Satellite Pipe, both waste and ore profile. Having a look at the waste profile in particular, our challenge here is significant peak waste at 21.2 million tons per annum. In terms of our ore profile, in particular Satellite Cut 5 West, which is our current cutback in the Satellite Pipe, comes to an end in 2025. We have a hiatus of satellite ore until 2030 and really kicking into gear in 2031. Those are our two challenges in terms of our existing mine plan.
We therefore undertook a significant review of Satellite Pit Cut 6 West, which is the next and final cutback for Satellite Pit, with a number of objectives. One, to significantly reduce the overall waste volumes. Two, to look at an underground option. Three, then to assess the technical and economic viability of a steeper slope design and compare that to the underground. The outcome of that was underground was taken to a level of pre-feasibility for an underground Satellite Pipe. The outcome is under current economic conditions, the final open-pit cutback proved to be more viable. We then embarked on a review and assessment of a steeper concept for the Satellite Pit. Our challenge here was really twofold.
Technically, this could be done and in terms of our structural stability, we have done the assessment and the reviews, and I will talk about that a little bit on the next slide, but that proved to be competent in terms of our rock competency to withstand a steeper slope concept. The second issue on safety was really our increase or potential increase of rockfall due to a reduction in catchment area within the steepened slopes. Clifford, to the next page. In terms of the Cut 6 design, we have completed a redesign of a steeper slope in the competent basalt rock, hard rock of the pit. It is worth noting that the steeper slopes and this concept is contained to the hard rock, our basalt component of the slopes and not to kimberlite.
In terms of kimberlite, we have kept that on the conventional slopes that we are currently using, which is a 14-m bench with 9-m berms. In terms of the process, we have got our external geotechnical experts. We have employed a number of external consultants and a peer review team to assist and advise and guide on this project. We first completed a steeper overall pit and interim slope stability analysis. The outcome of that, as I mentioned, the rock was analyzed to be competent, and there is a low risk of structural failure or sidewall failure. In fact, essentially no more than our current risk on current slope angles. The more focused risk that we looked at was the highwall lateral support and slope instability and the risk of rockfall.
In terms of rockfall, what we have in the new design, the major component that increases the risk slightly is the reduction of catchment area and to higher walls, including the design, which I will show on the next slide. To address this, a highwall lateral support and five-tier rockfall and slope instability mitigation plan was designed and interrogated, and this really addresses the risk of rockfall in each identified sector of the pit. The measures that have been included are strategically placed catchment fences and rockfall barriers, wire mesh draping, improved blasting techniques to protect the crests and our pre-splits, and mechanical scaling to remove any loose rock. Then the removal, bolting, and/or anchoring, depending on the severity of any wedges or key blocks that might be exposed during mining.
The implementation of this five-tier support will depend on the individual characteristics of each bench that is exposed as we mine down. Certain benches will require less support, and others may well require all the support, including the potential of bolting and anchoring, should we not be able to remove any large wedges. The challenges are more or less the same as what we have got in our current plan, and we have now employed an additional support regime to mitigate the risk of reduced catchment areas on any rockfalls. As mentioned in the second last bullet point, an independent technical review team, now consisting of geotechnical, mine planning, blasting and mining engineering specialists, have reviewed the technical viability and risk mitigation measures of this project.
This has been a project that's been ongoing for the last 12 to 18 months, and we received board approval for the project in late November. Just a little bit of detail on what we have done. The pit design in the picture on the left-hand side, the line being pointed to now, the brown line coming down, that is our pit design for our current Cut 5 West cutback, and where the arrow is pointing, that is our current surface as at 31st of October. So we've got another six to seven months of mining within that cutback, and then we will proceed to start the waste stripping for Cut 6 West. The existing plan, our conventional Satellite Cut 6 West. This is the plan that we previously had, and you can see the cutback starts outside the pit and then it's actually all lower down.
There's significant waste in that, and that waste amounted to about 88 million tons of waste. The revised plan. This plan will be mined from within the current pit. There are two quadruple benches that are mined all in the waste, where [inaudible] pointing now, that's waste hard- rock. That will be supported with the regime that I've just spoken about. In terms of once we hit the ore on the contact, there's the contact there, then we go back to our conventional mining for ore. So we keep the same slope angles for the ore portion of the cutback. There is opportunity to steepen that up. We have not included that in the plan yet, but there's opportunity to steepen that up to gain more ore in the later years at little to no extra waste.
We've kept it in conventional for this purpose at this stage. The impact of this is the waste area between the two pipes has been now taken out, and it's given us a reduction of waste from 87.9 million tons down to 21.5 million tons. It's a reduction waste of about 66.4 million tons, which results in approximately $180 million of saving in terms of our waste stripping obligations due to ore. The consequence, however, is that the ore profile reduces from 12.8 million tons- 10.4 million tons. Again, as I said, with the opportunity to gain additional tons in the later years and with the potential of steeping up a bit further. The support costs, based on the plan and the identified areas within the different sectors of the pit, we've done a full bill of quantities and tied that into our costing.
Our estimated costs for the support measures over the five-year period is $15 million. That's been added into our full mine profile. Our cost of fleet due to the reduced waste at this stage, we reduced the mining fleet capital from $50 million down to $40 million over the life of the mine. Bringing this together, in terms of Main Pipe and Satellite Pipe, and then having a full look of our long-term mine plan. The impact of reducing our waste profile, in particular in the Satellite Pipe, is that we've reduced our peak annual waste mining from 21.2 million tons- 10.5 million tons, and this is mainly due to the impact of reducing our Satellite Cut 6 West from a conventional plan of 15 million tons per annum to 3.8 million tons per annum.
Total ore remains the same at approximately 5.1 million tons per annum. The impact of the revised plan has also brought Satellite Pipe ore forward by approximately a year, with a ramp- up to 2.5 million tons per annum from 2029. This basically just gives us a summary of the impact. If we have a look at our overall mine plan, in terms of waste mined, we have reduced it from 136.9 million tons- 71.1 million tons. Again, the impact you can see there is the 66 million tons that we have managed to take out of the Satellite Cut 6 West cutback in the new plan. In terms of ore mined, we have also increased ore from 71 million tons- 79 million tons.
Notwithstanding a reduction in our current estimation of Satellite Pit ore of about 2.4 million tons, we have managed to increase Main Pipe by approximately 11 million tons. This really relates to the inclusion of certain ore in the main pit. In line with our current pit design, we have access to ore below the indicated line at little to no further extra waste. In terms of our resource and reserve statement, we could only include indicated level of ore. We have decided to include this in our mine plan, given that when we get there, this ore is almost free ore that we will be mining out, and that amounts to about 11 million tons. So it adds approximately two years of production. In terms of our opportunities and 2025 outlook, following the insourcing of mining operations, which is working extremely well.
We have had no disruptions in operations and certainly significant cost savings there. We have also recently, as Sunday, completed the insourcing of the processing activities effective 1st of December. We look forward to the savings and control we will have for the processing part or department of the mine. In terms of Satellite Pit, our next steps are to commence the waste stripping of Cut 6 West and start to support for safety reasons in H2 2025. Certainly, a lot of work needs to be done in the safety area to ensure that when we do start with Satellite Cut 6 West, that we are in a position to remind responsibly and safely being our number one priority.
We are also looking at a good opportunity to redesign the kimberlite ore slopes, as I mentioned earlier, and this will add some additional ore at little to no further waste stripping within that cutback. In the Main Pit, we are reviewing and evaluating the next cutback and final cutback for the Main Pit, which is Cut 4 West. There is the opportunity to steepen and support the basalt slopes, the waste slopes, similar to what we are doing in Cut 6 West, with an opportunity to decrease the waste volumes required and potentially increase ore availability. We are also looking at a similar project on our current Cut 4 East, which is where the Main Pipe ore is currently being extracted. As I mentioned, we are considering the value versus benefit of upgrading the inferred resource of 11 million tons, which we have included in the mine plan.
This will be looked at over the next couple of years in terms of timing and cost versus benefit of getting to an indicated level of resource. On that, if I can hand over to Mike to take us through the guidance for 2025.
Thanks, Brandon. Good morning, everyone. Based on the revised plan that is now approved and in play, we have given detailed guidance for 2025. I will just run through some of the numbers. Waste stripping is now 5 million-6 million tons, very similar to this year, and that is a big reduction in terms of existing plan, which you would have seen on slide five, which was about 12.5 million tons. Ore treated, as Brandon mentioned, the production treatment processing is similar and remains constant throughout the period, so that is 4.9 million-5 million tons. The one change this year will obviously be the end of Satellite Cut 5 West ore. We have about 0.7 million-0.8 million tons left, which we will mine out during the first half of the year.
As Brandon alluded to, the waste for the new cutback will start in H2, which coincides with us finishing that ore in the Main Pit. Carats recovered will be targeted about 84,000-88,000, and carats sold, 82,000-86,000 carats. That will be less than what we currently are forecasting this year. That is predominantly based on the mix with no satellites and only mainly main ore coming through. The lower-grade Main Pipe will be generating all our carats or most of the carats, and therefore it will come through a bit lower. The production schedules are set out in more detail in the annexures, where you can see the mining and processing rates in more detail per year for the life of mine, and we have set those out in the annexures. Then I think we are also pleased to update our cost targets for next year.
Direct cash costs LSL 235-LSL 242, and our guidance this year is about LSL 255. So it is much lower, notwithstanding an increase in inflation, and some cost containment coming through. Together with the operating cost per ton of LSL 330-LSL 350, and current guidance mid-range is about LSL 355, together with waste mining cash cost per waste ton of LSL 57-LSL 62, when our current target for 2024 is LSL 65. Then capital will be about $4 million-$4.5 million for next year. Moving on to the revolving credit facilities. We mentioned at the results earlier this year that our facilities were due to expire on 21 December 2024 this year. We currently have two significant facilities, the ZAR 750 million or Maloti facility, about $41 million at Letšeng. As at the end of November, we have no drawdown on that, so the full facility is available.
At our corporate office structure, we have got a $30 million revolving credit facility, and as at the end of November, $6 million is currently drawn down. We have negotiated slightly earlier with the lenders and managed to agree a two-year extension to the existing facility rather than putting a whole new facility in place. Therefore, we have extended this to 21 December 2026 for 24 months. Pleased to state that it is on similar terms and conditions as the existing facilities, and we have managed to negotiate slightly improved covenant ratios than what we previously had. The facilities will obviously need to be renewed in December 2026, and we will commence a process during the latter part of 2026 to look at an appropriate term for a revised, new facility at that time. Currently, the company is funded appropriately for the next two years.
I am going to hand over to Clifford just to talk to the diamond market and an update.
Thanks, Mike. 2024 has been a tough year in the diamond industry. No secret about that. If you look at general economic factors, the growth rates in the world forecast for 2024 between 2.6% and 3.2%, so that is an acceptable growth rate. But the problem is, in respect of our particular industry, and wars in Russia, Ukraine, and the Middle East, those have impacted on us quite severely. Of course, many of our customers are Israeli diamantaires, many of the traders, and the same from a supply perspective coming out of Russia, and the sanctions which were applied to Russia. This has all caused uncertainty in our market. Major factor of high interest rates, there was anticipation that these rates would reduce during the course of the year, far more than what has actually happened.
Inflation has been quite stubborn, and the central banks around the world, whilst they have made a start at this, it has not been of a sufficiently large cut to generate purchases in the diamond industry. Of course, the election of Donald Trump, and his economic policies, whilst uncertain at this stage, does give us some cause for concern. Trade wars, tariffs being applied, and the uncertainty which flows from that. Nevertheless, stock markets have reacted positively and, in general, there is a correlation between a high stock market value, and the diamond industry's outlook. The last point, global elections, in particular in this neck of the woods in Southern Africa, we saw a really quite extraordinary results coming out of Botswana.
For our particular business, for Gem Diamonds, that may have an impact because we are in the business of selling large diamonds, and we have a view that some inappropriate sales emerging out of Botswana have negatively impacted the sale of our goods. We think that that situation may, with a new government, be reversed, but it hasn't yet happened, but let us see. Specifically on the diamond market, pressure on both rough and polished prices has continued throughout the year. In the last sale, probably six months, we started to see slight price increases, in the low single-digit percentages, and this was very pleasing. That, of course, was as a result of both De Beers and Alrosa not supplying as many rough diamonds into the market, as had happened in the past.
I am sorry to say that very recently, we have seen that De Beers' prices have been adjusted down some 10%-15%, in a small category, even more than that. We will see the impact of that on the market as a whole. It's no secret that De Beers lag the market both on the way down and on the way up. So this is adjusting, and perhaps it hasn't fully adjusted to reality, but we shall see. Two further negative points. The GIA lab in Israel is closing, and that's a sort of an indicator of the state of play. Finally, there are four diamond mines in Lesotho and the three other mines other than Letšeng, of course, I'm talking Mothae, Liqhobong, and Kao have reduced production or placed their mines on care and maintenance.
Again, the reduction in production is in the fullness of time, no doubt, going to assist in the supply-demand balance. Hopefully, we start getting price increases. We look forward to the selling season, which has just begun. Early indicators out of the Thanksgiving sales, it's really information which can't be relied upon too much because it's 24 to 48 hours old, is that there were some pleasing sales of polish. Thanksgiving, we move into the Christmas season and then the new year. It is the case that many of the jewelry chains, the larger chains, have not been restocking as much as they ought to. So I would think that the new year is going to bring some restocking. But of course, De Beers and Alrosa have got significant stocks on board. We're looking forward to getting into the new year.
We're looking forward to applying the mine plan, which has now been approved by our board, and which of course, has a very positive impact on our cash flows. We look forward to some stronger prices, particularly at the top end in due course. We have struggled with a strengthening exchange rate against the dollar. But over the course of the past month or so, that trend has reversed, and is at a level which works for us. So let us see what happens in the future. That's all we have to say to you at the moment. Of course, as always Mike, Brandon, and I are available. Any questions you may wish to send to us directly. Right now, Janine, is there anything up there? No open questions. Okay. All right. Well, thank you everybody. Thanks for your time.
Again, just to reiterate, if there is anything you would like. Hold on, there is somebody there. The raised hand. Okay.
If you can unmute yourself, you are welcome to ask your question.
Hello?
Yeah. Hello, we can hear you.
I was wondering, I am a shareholder of Gem Diamonds as well. I am also a diamantaire. I was wondering, where do you have the sales of the large diamonds because of the last year, there was not any sales of large diamonds available to all the customers. For us as diamantaires, we have not been able to participate, and I know we could have added value and it is hurting me both ways because I am also a shareholder, so I know it is going to benefit me if I buy them from you. But I cannot buy from you, and I also do not affect this. It is something that goes both ways because if I am buying from you, so I know that my money is going to the shareholders, also the Gem Diamonds company, the whole group. So I am going to—
I understand your question.
Are you a registered buyer at our tenders?
Sure. We bought a lot of diamonds from you in the past.
Yes. As you know, we conduct our sales in Antwerp from time to time, four sales in the first half and four sales in the second half. As you know yourself, tenders deliver a great result in strong markets. Unfortunately, in bad markets, they don't deliver the best results, and a negotiated sale delivers a better result we have found. We have tried to protect our goods from fire sale prices over the course of the, I would say, the second half of the year, as our goods were being, in our view, punished unreasonably by a negative sentiment. We have, like De Beers, like Alrosa, we have sought to sell our goods into strong hands. So we do an analysis of our customers, who does well, who does badly, and we therefore target the goods.
So we too, our objective, of course, we're looking at it from a shareholder point of view. We want the highest possible prices, not, as I would say, fire-sale prices. Therefore, we adjust our sales processes from time to time. So, at the moment, we find ourselves in this difficult period. So it is an open question, what delivers the best results? We think that we have an obligation to protect our goods. As you know, one of the major competitors that we have is selling diamonds in an indiscriminate way, which is hurting us. So I think we probably are doing the right thing for now. Ultimately, when the market strengthens, we will go back to the open tender system.
But what we were finding, the results coming out of the tender, was that the vast majority of offers that we were getting were really, I wouldn't say—
Below the expected—
—derisory, but they were in that frame. So that's how we will deal with it. Look forward to welcoming you back in the fullness of time. We're looking forward to next year, hopefully showing us a bit of a stronger situation, and hopefully that position in Botswana sorts itself out so that we don't have people undermining the prices at our end of the market.
Mm-hmm. Okay, thank you so much.
Okay.
Thanks.
All right, thank you. There is a question, do you see a market recovery this year? How long do you think it will take? Has the China downturn on luxury affected your sales? So market recovery this year, as I commented, there was the beginnings of a recovery or stability over the course of the last month. Many of the tenders which took place in Dubai showed price increases, 3%-5% or so, in two to three carats, five carats, in that sort of zone. I am slightly anxious about what the impact is going to be as a result of the De Beers price decreases now. We shall know in the next couple of weeks. I do not think a market recovery during the balance of this year is on the cards, but I hope I am wrong. How long do you think the market recovery will take?
I think it is quite important to see what emerges from the Thanksgiving, Christmas, New Year sales period. Strong sales followed by strong restocking normally leads to a better feeling in the market and positive sentiment and price increases. So that is what I am hoping will happen. I have a gleam in my eye that this may well be the case. Let us see. That is my anticipated outcome. We will start to know that in mid-January, towards the back end of January. The China downturn on luxury goods has definitely affected diamond sales at the top end. We had a lot of sales into that part of the world, and I think it really has affected us. So your question is, unfortunately it is correct. No other questions. Would anybody else like to pose a question? Okay. Well, thank you everybody for your time.
Just to reiterate, if there was something you wanted to ask you could not get through or you only think of it afterwards, please do not hesitate to contact Mike, Brandon, or myself, and we would be only too happy to give you a call or send you an email and respond to your query. Thanks very much.