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Annual Report and Accounts 2019 Accounts Annual and Report ANNUAL REPORTAND ANNUAL ACCOUNTS 2019 Delivering our strategy ANNUAL REPORT AND ACCOUNTS Gem Diamonds Limited 2nd Floor, Coastal Building, Wickham’s Cay II, PO Box 2221, Road Town, Tortola, British Virgin Islands, Registration number: 669758 www.gemdiamonds.com 2019 GEM DIAMONDS LIMITED ANNUAL REPORT AND ACCOUNTS 2019 BUSINESS OVERVIEW MANAGEMENT REVIEW OPERATING REVIEW GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION 1 CONTENTS ABOUT GEM DIAMONDS BUSINESS OVERVIEW WELCOME TO THE GEM DIAMONDS About Gem Diamonds 1 ANNUAL REPORT AND ACCOUNTS 2019 2019 in review 2 The Annual Report and Accounts (this report) have been Market review 6 prepared in accordance with: Chairman’s statement 8 CARAT CLARITY Our strategy 11 • applicable English and British Virgin Islands law; Purpose Vision Viability statement 14 • regulations and best practice as advised by the Financial To support, develop Principal risks and uncertainties 15 Reporting Council (FRC) and the Department of Business, Unearthing unique MANAGEMENT REVIEW Innovation and Skills in the United Kingdom (UK); possibilities and empower our Chief Executive’s review 22 • guidance from the International Integrated Reporting people so that: Group financial performance 26 Council (IIRC) Integrated Reporting <IR> Framework; • a meaningful, sustainable OPERATING REVIEW • International Financial Reporting Standards (IFRS); and contribution can be made to the Letšeng 33 • the UK Corporate Governance Code 2018. countries in which we operate; Technology and innovation 38 The report covers Gem Diamonds Limited and its subsidiaries and Business transformation 40 (the Group) for the financial year ended 31 December 2019. • we can deliver long-term value to GOVERNANCE our shareholders. * Directorate and executive management 44 REPORTING SUITE Chairman’s introduction to corporate governance 49 In addition to the Annual Report and Accounts 2019 our UK Corporate Governance 51 reporting suite includes: Audit Committee 59 Report on Payments to Governments 2019 Nominations Committee 62 HSSE Committee 65 Information related to payments made to governments will Annual Statement on Directors’ Remuneration 68 be compiled as required under the UK’s Report on Payments to Governments Regulations 2014 (as amended December Directors’ Remuneration policy 70 2015). These regulations enact domestic rules in line with The Annual Report on Remuneration 79 Directive 2014/34/EU and apply to companies involved in Directors’ Report 94 extractive activities. The report also intends to satisfy the FINANCIAL STATEMENTS requirements of the Disclosure and Transparency Rules of Responsibility Statement of the Directors 100 the Financial Conduct Authority in the UK. Details Independent Auditor’s Report 101 regarding payments made to governments will be made Annual Financial Statements 104 available at www.gemdiamonds.com. OTHER INFORMATION Abbreviations and Definitions 161 Sustainable Development Report 2019 CUT COLOUR Contact Details and Advisers 162 (report and interactive platform) The way we do things How we create value Information relating to sustainable development has been Care – We listen and respond responsibly to the needs of our This is detailed in our business model compiled in accordance with the Global Reporting Initiative employees, communities and shareholders. We honour our which follows on page 4. Navigations (GRI) G4 Sustainability Reporting Guidelines and Gem commitments to all stakeholders, which include the natural Diamonds’ internal reporting guidelines, with consideration environment in which we operate. This icon indicates additional information of the UN Global Compact. Details regarding sustainable available on the Group’s website at development can be found at www.gemdiamonds.com. Trust – We empower our people and trust them to make www.gemdiamonds.com decisions which will deliver on our strategy. BOARD APPROVAL Ethical – We have zero tolerance for bribery and corruption This icon refers the reader to further information The Board, supported by the Audit Committee, acknowledges and conduct ourselves in a manner consistent with good about the Group’s sustainable development its responsibility to ensure the integrity and completeness of governance practices. We pride ourselves on being socially activities on the Group’s website at this report. The Board applied its collective mind to the and environmentally responsible. ENGAGING OUR www.gemdiamonds.com preparation and presentation of this report. We consider the EMPLOYEES ON CULTURE interests of employees and other stakeholders, including the Respect – Everyone matters and is treated equally. We S172 (1)(b)&(e) cultivate an open and transparent environment where we This icon indicates a link to the Remuneration communities and environment in which we operate, when The Board should establish the Company’s values and value the beliefs, ideas and contributions of our employees, Report, which starts on page 68 making decisions. We believe that the report provides a promote the desired culture. The Gem Diamonds Board balanced and appropriate representation of the Group’s communities and shareholders. engaged its employees through a survey and a strategic performance, strategy and material risks and acting fairly, session on mission and values to collaboratively define the This QR code refers the reader to the Group’s Flexible and open minded – We encourage and consider in good faith, considered what is most likely to promote the way we do things. Internal stakeholder feedback was used website www.gemdiamonds.com ideas from employees while remaining responsive and agile. success of Gem Diamonds in the long term. to reach a conclusion on the desired culture within Gem Passionate and fun – We enjoy the work that we are fortunate Diamonds. This was important to achieve a desired The Board approved the Annual Report and Accounts 2019, to do and the people we do it with. We seek opportunities to culture within the Company. which includes the Strategic Report on pages 1 to 43 on explore and develop while encouraging a work-life balance. 10 March 2020. * Image supplied by Graff Diamonds International. BUSINESS OVERVIEW MANAGEMENT REVIEW OPERATING REVIEW GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION I ABOUT GEM DIAMONDS CARAT CLARITY Purpose Vision Unearthing unique To support, develop possibilities and empower our people so that: • a meaningful, sustainable contribution can be made to the countries in which we operate; and • we can deliver long-term value to our shareholders. * CUT COLOUR The way we do things How we create value Care – We listen and respond responsibly to the needs of our This is detailed in our business model employees, communities and shareholders. We honour our which follows on page 4. commitments to all stakeholders, which include the natural 13.32 carat pink diamond environment in which we operate. Trust – We empower our people and trust them to make that sold for a Letšeng record decisions which will deliver on our promises. of US$656 934 per carat. The Ethical – We have zero tolerance for bribery and corruption and conduct ourselves in a manner consistent with good use of pink in this report is governance practices. We pride ourselves on being socially and environmentally responsible. dedicated to this remarkable ENGAGING Respect – Everyone matters and is treated equally. We recovery. ON CULTURE cultivate an open and transparent environment where we The Board should establish the Company’s values and value the beliefs, ideas and contributions of our employees, promote the desired culture. The Gem Diamonds Board communities and shareholders. engaged its employees through a survey and a strategic Flexible and open minded – We encourage and consider session on mission and values to collaboratively define the ideas from employees while remaining responsive and agile. way we do things. Internal stakeholder feedback was used to reach a conclusion on the desired culture within Gem Passionate and fun – We enjoy the work that we are fortunate Diamonds. This was important to achieve a desired to do and the people we do it with. We seek opportunities to culture within the Company. explore and develop while encouraging a work-life balance. * Image supplied by Graff Diamonds International. 2 GEM DIAMONDS LIMITED ANNUAL REPORT AND ACCOUNTS 2019 BUSINESS OVERVIEW MANAGEMENT REVIEW OPERATING REVIEW GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION 3 2019 IN REVIEW % Measure 2019 2018 change Movement SALES AND MARKETING Average price per carat achieved (US$) 1 637 2 131 (23) DIAMOND ANALYSIS AND The Group's diamond sorting, sales and marketing operation Revenue (US$ million) 182.0 267.3 (32) in Belgium focuses on: MANUFACTURING • maximising the revenue achieved on diamond sales; Total direct cost per tonne treated (LSL) 181.2 182.5 (1) The Group’s HIGH-TECH ROUGH DIAMOND • developing the Gem Diamonds brand in the market; and Total operating cost per tonne treated (LSL) 245.9 295.1 (17) ANALYSIS AND MANUFACTURING operation • enhancing customer relationships. EBITDA1 (US$ million) 41.0 87.7 (53) is tasked with: Our diamonds are predominantly sold through a tender process. Through mapping and analysis, the value of the Letšeng • understanding the value of exceptional large Profit for the year (from continuing operations) (US$ million) 15.0 52.4 (71) high-quality diamonds is determined and used to achieve the high-value rough diamonds through mapping highest rough value THROUGH MULTIPLE SELLING CHANNELS. Corporate costs (US$ million) 9.4 10.0 (6)
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