investor presentation - gem diamonds · group risk 2010” in “the business review” in our...

Investor Presentation

© 2011 GEM DIAMONDS LIMITED


DISCLAIMER

The following presentations are being made only to, and are only directed at, persons

to whom such presentations may lawfully be communicated (“relevant persons”). Any

person who is not a relevant person should not act or rely on these presentations or any

of their contents.

Information in the following presentations relating to the price at which relevant

investments have been bought or sold in the past or the yield on such investments

cannot be relied upon as a guide to the future performance of such investments. These

presentations do not constitute an offering of securities or otherwise constitute an

invitation or inducement to any person to underwrite, subscribe for or otherwise

acquire securities in any company within the Group.

The presentations contain forward-looking statements which are subject to risk and

uncertainties because they relate to future events. These forward-looking statements

include, without limitation, statements in relation to the Group’s projected growth

opportunities. Some of the factors which may cause actual results to differ from these

forward-looking statements are discussed in certain slides of the presentation and

others can be found by referring to the information contained under the heading “Key

Group risk 2010” in “The Business Review” in our Annual Report for the year ended

2010. The Annual Report can be found on our website (gemdiamonds.com).

The presentations also contain certain non-IFRS financial information. The

Group’s management believes these measures provide valuable additional

information in understanding the performance of the Group or the Group’s

businesses because they provide measures used by the Group to assess

performance. However, this additional information presented is not uniformly

defined by all companies, including those in the Group’s industry. Accordingly, it

may not be comparable with similarly titled measures and disclosures by other

companies.

Additionally, although these measures are important in the management of the

business, they should not be viewed in isolation or as replacements for or

alternatives to, but rather as complementary to, the comparable IFRS measures

such as revenue and other items reported in the consolidated financial

statements.

Information in this presentation is as at November 2011

1


AGENDA

Announcement

Letšeng

Uniqueness of Letšeng

Project Kholo

The Value of Gem

2


ANNOUNCEMENT

The expansion project (Project Kholo) at Letšeng approved by the Gem and

Letšeng Boards

Gem is considering all of its options regarding its Ellendale mine asset and has

appointed advisors Gresham Advisory Partners to assist in this regard

The Company’s Cempaka mine in Indonesia has been sold for a cash sum of

$5 million

3


4 THE UNIQUENESS OF LETSENG

The most valuable on EarthProduct Differentiation

0

5000

10000

15000

20000

10 15 20 25 30 35 40 45 50 55

Aver

age

$/¢t

Average size ¢/stone (Elite Rough +25carats, A/B quality)

Catoca

BHP Billiton

Letšeng

De Beers

Rockwell

PetraAlrosa

Rio Tinto

Best of the best – coarseness and Type IIa proportion produces the best elite rough

Source – internal 2010


5 THE UNIQUENESS OF LETSENG

10%

15%

20%

25%

30%

35%

40%

45%

2011 2012 2013 2014 2015

Elite Production Market Share

Letšeng

Alrosa

De Beers

Currently leading producer of Elite – this position to grow after expansion

Source – internal 2010 updated 2011


LETSENG – PROJECT KHOLO

6

Project Kholo will commence in January 2012, and will ramp up to full

production by July 2014

Increasing production to 10 million tonnes per annum (from 5.6 mtpa)

Improving grade through increased liberation

Reducing diamond damage

Reducing unit costs

Increasing value from sales and marketing activities and downstream cutting

and polishing

Current 25 year mining plan with resource extensions expected


LETSENG – PROJECT KHOLO SNAPSHOT

7

Based on a real DCF model with Gem price increases of 2% nominal until 2015 and WWW thereafter

Letšeng Snapshot - (100% project value) November 2011

Total Project Kholo capital expenditure (US$m) 280

Revenue available for Cutting & Polishing up to 50% by 2017

Net Cutting & Polishing uplift 10-13%

Exchange rate (Rand/US$) 8.00

Project Kholo NPV (US$m) 8% discount rate 646

Project Kholo IRR 40%

Project Kholo Payback - from start of project (2012) 2016

Letšeng NPV (US$m) 8% discount rate 2 517


LETSENG – PRODUCTION PROFILE

8

Project Kholo

Increase production to 10mtpa

Increase carat production to

180k -200k per annum

Underground to follow

Conceptual study indicates going

underground post Satellite Cut 5

adds value

Waste stripping peak of 63 million

tonnes reduced to 45 million

tonnes

PFS underway and expected to be

completed by April 2012

Production profile - current


9 PROJECT KHOLO – EXECUTION TIMELINE

2014

J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D

Option Selection Complete

Board approval

Long Lead items

Early Works - Earthworks

Early Works - Site Preparation

Civil Work Starts

Plant 3 Construction Period

Mining ramp-up

Plant 3 Ramp-up

Full Production - July 2014

Detail Design

Construction

2013

Letseng Project Kholo Execution Program

Procurement

2011 2012

PFS / Feasibility study


PROJECT KHOLO NPV SENSITIVITIES

10

REVENUE

0.70 0.80 0.90 1.00 1.10 1.20 1.30

7.40 146 214 280 801 413 813 546 205 678 004 809 459 940 914

7.60 181 797 315 995 448 899 581 060 712 730 844 185 975 640

7.80 215 374 349 281 482 185 614 128 745 675 877 130 1 008 585

EXCHANGE RATE 8.00 247 272 380 903 513 610 645 518 776 973 908 428 1 039 883

8.20 277 614 410 982 543 491 675 289 806 744 938 199 1 069 654

8.40 306 511 439 629 571 950 703 643 835 098 966 553 1 098 008

8.60 334 040 466 943 599 085 730 677 862 132 993 587 1 125 042

CAPITAL

0.90 0.95 1.00 1.05 1.10 1.15 1.20

1.20 363 617 354 474 345 332 336 189 326 906 317 563 308 220

1.15 438 670 429 527 420 384 411 241 402 099 392 842 383 499

1.10 513 669 504 579 495 437 486 294 477 151 468 009 458 779

1.05 588 610 579 594 570 489 561 347 552 204 543 061 533 918

OPEX 1.00 663 551 654 535 645 518 636 399 627 256 618 114 608 971

0.95 738 493 729 476 720 459 711 443 702 309 693 166 684 024

0.90 813 434 804 417 795 400 786 384 777 362 768 219 759 076

REVENUE

0.70 0.80 0.90 1.00 1.10 1.20 1.30

12.0% 126 732 228 096 328 247 427 304 525 752 624 199 722 646

11.0% 151 771 260 205 367 490 473 749 579 434 685 119 790 804

10.0% 179 938 296 073 411 129 525 231 638 797 752 362 865 928

9.0% 211 626 336 144 459 658 582 294 704 433 826 573 948 712

DISCOUNT RATE 8.0% 247 272 380 903 513 610 645 518 776 973 908 428 1 039 883

7.0% 287 355 430 870 573 549 715 512 857 067 998 623 1 140 178

6.0% 332 394 486 599 640 060 792 895 945 369 1 097 844 1 250 319


GROUP – CASH POSITION

11

Current group cash on hand as of 25 November 2011- $151m ($37m at Letšeng)

Standby working capital facility implemented

3 year working capital facility - M250m ($31m) with Standard Lesotho Bank

Agreements signed

Facility available for draw down as from January 2012

Potential to increase the funding facility if market conditions deteriorate

12 LETSENG – PROJECT KHOLO INTERNAL RISKS

Risks Issue Solutions

Power Additional 10 MVA required for

expansion

2 options available. Preferred option costed

into capital estimate ($25m). Possible delay,

cost of diesel generated power will be

required for delay period.

Process water Depending on rainfall, current

water levels may be insufficient

for expansion

Upgrade to plant 1 thickener will increase

return water capacity from slimes ($2.8m)

Slimes dam

capacity

Current slimes dam has

insufficient capacity for

expanded LoM

New slimes dam site identified, designed and

costed into capital estimate (inside lease area)

Ore resource Inherent uncertainty in ore-body

volume and depth

21 hole drill program underway to provide

resource data. Project payback is within the

current indicated level


THE VALUE OF GEM

13

* Internal Valuation - Based on Gem current price increases of 2% nominal until 2015 and WWW thereafter

1,684

484

118

43 36

137

1,586

-

400

800

1,200

1,600

2,000

Letseng Ghaghoo Ellendale Cash Net CHQ Group NPV Current MarketCap

NP

V $

USm

m

GEM NPV – GROUP ASSETS (ATTRIBUTABLE)

Shares in issue – 138m

Current Share Price - £2.03


Thank You

investor presentation - gem diamonds · group risk 2010” in “the business review” in our...

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