12th Jul 2007 07:12
Gem Diamonds Limited12 July 2007 News Release12 July, 2007 GEM DIAMONDS LIMITED ("Gem Diamonds" or the "Company") TRADING UPDATE FOR THE SIX MONTHS ENDED 30 JUNE 2007 Gem Diamonds Limited (LSE: GEMD) is aiming to become a leading diamond producerand is pursuing an accelerated growth strategy through acquisitions and thedevelopment of existing assets. Gem Diamonds has a balanced portfolioconsisting of both a producing kimberlite mine and alluvial mine, numerousdevelopment projects and a number of exploration assets with long-termprospects. The Company's current operations are situated in, Angola, Botswana,the Central African Republic, the Democratic Republic of Congo, Lesotho andIndonesia. Established in July 2005, Gem Diamonds listed on the main board of the LondonStock Exchange in February 2007 raising over US$600 million. It is currentlycapitalised at approximately US$1,25 billion and has US$519 million of cash onits balance sheet. Senior Management at Gem Diamonds has more than 150 yearsexperience in the diamond mining industry. Gem Diamonds issues this statement as an unaudited trading update for the sixmonths ended 30 June 2007 (the period), in advance of its half year results tobe announced on 13 September. HIGHLIGHTS: Sales o 39 204 carats sold from Letseng Mine, compared to 30 549.sold in the same period last year (28% increase) o US$69,6 million total sales value from Letseng Mine, compared to US$38,0 million for the same period last year (83% increase) o Letseng average price per carat over the period of US$1,894 from Satellite Pipe (2006: US$1281) and US$1128 from Main Pipe (not previously mined) o Cempaka sales of US$2.3 million to end June o First export of diamonds from the DRC, awaiting sale Operational o 215 carat D-colour flawless diamond recovered in January, sold for US$8.3 million o Letseng Mine continues to produce large stones - with 226 diamonds of more than 10.8 carats recovered in the period o Improved recovery techniques at Letseng achieve grade of 2.26 cpht from the Satellite Pipe o Construction of second plant at Letseng to double processing capacity on time for completion early 2008 and currently on budget o Mining of second Letseng kimberlite begun, recovery of 58 carat diamond, sold for US$2.1 million o Commissioning of plant commenced at Mbelenge Mine in DRC, ahead of schedule o Trial mining set to commence in 2008 at Longatshimo in DRC, ahead of original planned date Corporate o Two acquisitions, BDI Mining and Gope, completed since listing; for a combined net purchase consideration of US$114 million o BDI Mining acquisition gives Gem Diamonds its second producing mine at Cempaka, Indonesia • Ramp up of Cempaka production set to commence shortly • Sale of Woodlark gold asset underway o Gope acquisition concluded, resource subsequently upgraded and updating of feasibility study begun Gem Diamonds CEO Clifford Elphick comments: "In executing its business plan and investing the capital provided to it, GemDiamonds is establishing itself as a gem diamond producer of significance. TheLetseng Mine has delivered excellent production increases and sales pricesachieved have exceeded expectations. The expansion project at Letseng is ontime and budget. Since the Company listed on the London Stock Exchange inFebruary 2007, it has acquired BDI Mining and Gope. With the acquisition of BDIMining, Gem Diamonds has added another producing mine with significant growthpotential to its portfolio. We will continue to seek further strategicacquisition opportunities that offer further growth potential." 1 Lesotho Gem Diamonds holds a 70% shareholding in Letseng Diamonds (Pty) Ltd (Letseng) inpartnership with the Government of the Kingdom of Lesotho which owns theremaining 30%. 1.1 Letseng Operational Update 1.1.1 Production A total of 1 367 113 tonnes were mined and treated from the Satellite Pipe overthe six months. Carats recovered were 30 876.53 at a recovered grade of 2.26cpht, 14% above the budget grade of 1.98 cpht. Alluvial Ventures, who are contracted to mine and process alluvial, eluvial anddump material on behalf of Letseng, successfully completed the double up in itsplant capacity during H1 2007 and treated a total of 508 193 tonnes andrecovered 6 976.98cts at a grade of 1.37 cpht, 11.4% above budget grade of 1.23cpht. All ore treated by Alluvial Ventures from early February 2007 wasweathered kimberlite from the Main Pipe 1.1.2 Diamond Sales Tender results for the period are as follows: Tenders Carats sold Total tender value US$ Achieved US$/ctSatellite Pipe 33 153.33 62 808 167 1 894Main Pipe 6 050.48 6 828 441 1 128Total 39 203.81 69 636 608 1 776 These compare to the tender results for the six month period ended 30 June 2006as follows: Tenders Carats sold Total tender value US$ Achieved US$/ctSatellite Pipe 26 487.85 33 921 432 1 281Alluvials 4 060.71 4 067 650 1 135Total 30 548.56 37 989 082 1 244 1.2 Letseng Expansion Project Letseng is currently engaged in a doubling up of its processing capacity withthe construction of a second plant. Combined, the two plants will process 5.2million tonnes per annum from forecast full production date of end Q2 2008. To date the project is running on budget however the final estimated cost of theproject is being challenged by legitimate scope changes and increased costs dueto shortage of skilled resources. An extensive review of funding options for the project was undertaken earlier inthe year. However, strong production results and high diamond prices achieved,have resulted in Letseng being in a position to self fund this expansionproject. As such no debt funding will be raised. 2 Botswana On 29 May 2007, the Company announced its acquisition of 100% of the shares ofGope Exploration Company (Pty) Ltd (Gope) from De Beers and Xstrata for US$34million. 2.1 Resource development and exploration An independent review of the GEMCOM model available on the Gope kimberlitedeposit was undertaken by Competent Persons Venmyn Rand. The results of thisindependent review have resulted in a resource upgrade to indicated down to 500mfrom the De Beers model of indicated to 300m and inferred to 400m. The resultis an increase in the total resource to 97 million tonnes and 18.8 millioncarats at a grade of 19.3cpht, from a previous 79 million tonnes and 15 millioncarats at similar grade. 2.2 Gope Project Update The process of updating the existing feasibility study and completing a revisedEIA on the Gope kimberlite has commenced with relevant advisors appointed.Discussions with relevant stakeholders and affected persons are ongoing. Theapplication for a Mining Licence will be submitted as and when appropriate. 3 Indonesia Gem Diamonds successfully completed the acquisition of BDI Mining Corp (BDIMining), first announced in April 2007 at a net cost of US$80 million. BDIMining owns 80% of PT Galuh Cempaka (PTGC), which holds the mining rights to theCempaka alluvial diamond mine in Indonesia. The remaining 20% is held by ANTAM,an Indonesian state mining company. BDI Mining also owns 100% of the WoodlarkGold Project in Papua New Guinea. Integration of BDI Mining into Gem Diamonds is proceeding well. A restructuringof the boards of BDI Mining and its subsidiaries has been completed and a reviewof the BDI Mining group structure, with a view to simplification, is inprogress. Gem Diamonds appointees have been made to the boards of BDI Miningand its subsidiaries. Neil Kaner, formerly Letseng Diamonds Consulting MiningEngineer has been appointed as Managing Director and Lee Spencer, the formerCEO, has been appointed as New Business and Development Director. Lee willcontinue to be closely involved in the development of the Cempaka Mine. 3.1 Resource development and exploration Following a site inspection of Cempaka in April 2007, the existing fluvialgeological model was further refined. Although the basal, quartzose gravelsconstitute the principal diamond placer, additional resource potential wasidentified in the overlying sand dominated package. Using the extensivedrilling and sampling results generated from previous exploration campaigns,preliminary 3-D modelling of the Cempaka deposit has now commenced. 3.2 Cempaka Operational Review Production, pre Gem Diamonds ownership, for the first half of the year wasadversely affected by a lack of capital which resulted in low levels ofoverburden stripping leading to diamondiferous gravel shortages for feed to theplant. Following the acquisition, plans have been implemented to ramp up production to80 000 bank cubic metres (BCM) per month during H2 2007. The first batch of newmining equipment has been ordered and delivery is due in Q3 2007 as part of amove from contractor to owner mining. Due to the size of the deposit Gem is evaluating upscaling the operationsignificantly beyond 80 000 BCM per month. Investigations into this havecommenced alongside a review of the mining method with a view to reducing unitcosts. 3.3 Woodlark Operational Review As a focused diamond mining company, Gem Diamonds has elected to dispose of theWoodlark Gold Project and is actively pursuing a sale process. 4 Democratic Republic of Congo (DRC) Gem Diamonds has interests in four projects in the DRC at Mbelenge, Lubembe,Longatshimo and Tshikapa. These interests are held via a number of companies inwhich Gem Diamonds has between a 49.99 and 100% shareholding. 4.1 Resource development and exploration Detailed mapping of river features and trapsites along the Lubembe, Tshiumbu,Tshikapa, Longatshimo and Kasai Rivers was completed using Quickbird satelliteimagery and limited ground-truthing. Additional field mapping and manualsampling of river terraces and floodplains is ongoing. A helimag follow up survey was completed over 74 aeromagnetic anomalies, 55 inthe Lubembe area and 19 in the Longatshimo area. These detailed surveysgenerated an additional anomaly in Lubembe and an additional three anomalies inLongatshimo. In Lubembe, 23 of the 55 aeromagnetic anomalies were drilled andresolved. No kimberlites have been intersected to date. Drilling will continueat Lubembe and will shortly commence at Longatshimo. 4.2 Mbelenge Operational Review More than 60% of the earthmoving fleet has arrived and the first mine cut hasbeen prepared ahead of the scheduled production start-up. The Treatment Plantfacility has been erected and tested successfully with a first pass of gravelmaterial. Commissioning of the DMS plant commenced at Mbelenge in late June,ahead of the scheduled start date in Q3 2007. 4.3 Longatshimo Operational Review Based on historical data and the results of the conventional prospectingprogramme conducted in 2006 and 2007, a trial mining programme has been defined. Scope of work, staffing and equipment requirements and budget have beendetermined and orders have been placed for long lead items. Trial mining isexpected to commence in H1 2008 ahead of earlier expectations for production in2009. 4.4 Lubembe Operational Review Phase 1 delineation drilling of basal Kwango gravels on the terraces wascompleted at Lubembe. Furthermore two 8" dredges were operational in theLubembe region recovering a total of 7,571.41 carats, below the expected halfyear target of 10,500 carats. This shortfall is due to prolonged floodingprecluding work in the higher grade, but more turbulent, rapid reaches. Thediamonds were dispatched to Antwerp with Kimberley Process certificates forfurther analysis and later sale. Two aquasweeper units and associated gravel pre-treatment systems have beendelivered to the Lubembe project and are expected to substantially improve theefficiency of the dredge exploration programme. 5 Central African Republic (CAR) Gem Diamonds holds a 75% interest in Gem Diamonds Centrafrique SA, inpartnership with the Government of the CAR which holds the remaining 25%. 5.1 Resource development and exploration Quickbird satellite coverage of the lowermost portion of the Mambere concession,including le Buckle - one of the initial target areas - was carried out at theend of the dry season. A base grid of sample and observation pits wasestablished over le Buckle of which a total of 45 pits were excavated and thegravel recovered and treated. The process delivered inconclusive grade resultsbut yielded valuable information on the bedrock geology and the surfacegeomorphology. On the basis of the above observations, five mega pits weresited and the first bulk samples were excavated with material being treatedthrough a 15 tonne per hour DMS delivered to site and commissioned during thefirst half of 2007. 5.2 Mambere Project Update The Treatment Plant arrived on site in mid March. The DMS section wasoperational by end April but the Final Recovery section was damaged duringtransportation to site and as a result the Plant will only be fully commissionedin early July. The plant is now operating beyond design capacity. 291 diamonds weighing 88.2cts have been recovered from both the terraces andriver at this early stage, but grades achieved have been lower than anticipated. Accordingly, the sampling programme has been extended and the initiation oftrial mining delayed. 6 Angola A Co-operation Agreement for the evaluation of the Chiri kimberlites in theLunda Sul province of Angola was signed with Avantis Angola Limited (Avantis),one of five companies in a joint venture that were granted exploration rightsfor the Chiri 1 and 2 kimberlites, in December 2006. The conditions precedentto the Co-operation Agreement were subsequently met in March 2007. 6.1 Resource development and exploration A first reconnaissance site visit was conducted in February 2007 by Gem Diamondsand Remote Exploration Services, the geological consulting and contractingcompany appointed to design and manage the preliminary evaluation andfeasibility studies. A preliminary evaluation programme comprising geophysicalsurveys and a core drilling programme over the kimberlites has been designed. 6.2 Chiri Operational Review The Chiri Technical Committee, comprising three representatives from GemDiamonds and two from Avantis, met at the beginning of May. Manufacture of the sample treatment plant is nearing completion in South Africaand, when the requisite Government approvals and permissions are in place, willbe transported overland to site. 7 Corporate As indicated at the time of the Company's IPO, discussions are ongoing toincrease the representation of Non-Executive Directors on the Board and, inaccordance with the Company's commitment to compliance with the Combined Code,spilt the role of Chairman and Chief Executive. Efforts are ongoing to ensure the inclusion of the Company's shares in theFTSE250. ENDS For further information: Gem Diamond Technical ServicesClifford ElphickAngela ParrTel: +27 11 325 7652 Pelham PRCandice SgroiTel: +44 207 743 6376 James HendersonTel : +44 207 743 6673 Charles VivianTel : +44 207 743 6672 About Gem Diamonds Gem Diamonds is a diamond mining company with a balanced portfolio of aproducing kimberlite mine, a producing alluvial mine, development projects andlong-term prospects. Established in July 2005, Gem Diamonds is pursuing anaccelerated growth strategy and aims to become one of the world's leadingdiamond producers. Gem Diamonds currently has one producing kimberlite mine, Letseng, in Lesotho, a producing alluvial mine Cempaka in Indonesia, a kimberlitedevelopment project in Botswana, four development projects in the DemocraticRepublic of Congo, one in the Central African Republic and an option to developthe Chiri kimberlite concession in Angola. Gem Diamonds has a specific focustowards higher value diamonds, a segment of the market that its managementbelieves will deliver superior long term returns. In February 2007, Gem Diamonds listed on the London Stock Exchange and raisedover US$600 million (net of expenses) to fund development of its existing assetsas well as to pursue acquisitive growth opportunities. Gem Diamonds trades underthe code GEMD. At the time of this announcement the market capitalization of thecompany is approximately US$1,25 billion. For further information about Gem Diamonds visit www.gemdiamonds.com. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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