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Annual Report and Accounts 2020 Contents ANNUAL REPORT AND ACCOUNTS 2020 CONTENTS STRATEGIC REPORT 02 WELCOME TO THE GEM DIAMONDS About Gem Diamonds 03 ANNUAL REPORT AND ACCOUNTS 2020 2020 in review 04 The Annual Report and Accounts (this report) have been prepared in accordance with: Our business model 06 • applicable English and British Virgin Islands law; Chairperson’s statement 10 • regulations and best practice as advised by the Financial Market review 13 Reporting Council (FRC) and the Department of Business, Stakeholder engagement 15 Innovation and Skills in the United Kingdom (UK); • guidance from the International Integrated Our strategy 21 Reporting Council (IIRC) Integrated Reporting Principal risks and uncertainties 25 <IR> Framework which is publicly available at Viability statement 31 www.integratedreporting.org ; • information related to payments made to governments was compiled as required under the UK’s Report on PERFORMANCE REVIEW 32 Payments to Governments Regulations 2014 (as amended Chief executive’s review 33 December 2015) as applicable to companies involved in extractive activities. It is also intended to satisfy the Chief financial officer’s review 36 requirements of the Disclosure and Transparency Rules; Operational review 43 of the Financial Conduct Authority in the UK; Sustainability 48 • International Financial Reporting Standards (IFRS); and • the UK Corporate Governance Code 2018 which is GOVERNANCE 51 publicly available at www.frc.org.uk . The report covers Gem Diamonds Limited and its subsidiaries Chairperson’s introduction to corporate governance 52 (the Group) for the financial year ended 31 December 2020. Governance at a glance 54 Directorate and executive management 56 REPORTING SUITE Corporate governance statement 58 In addition to the Annual Report and Accounts 2020 our reporting suite includes: Nominations committee 69 Sustainability committee 72 Sustainable Development Report 2020 Audit committee 75 (report and interactive platform) Remuneration committee 81 Information relating to sustainable development has been Directors’ report 110 compiled in accordance with the Global Reporting Initiative (GRI) G4 Sustainability Reporting Guidelines and Gem Diamonds’ internal reporting guidelines, with consideration FINANCIAL STATEMENTS 113 of the UN Global Compact. Details regarding sustainable development can be found on the www.gemdiamonds/ REPORT ON PAYMENTS TO GOVERNMENTS 176 reports.co.za/reports/sd-2021/index.php and in our 2020 Sustainability Report. ADDITIONAL INFORMATION 179 BOARD APPROVAL The Board, supported by the Audit Committee, acknowledges its responsibility to ensure the integrity and completeness of This icon indicates additional information available this report. The Board applied its collective mind to the on the Group’s website at www.gemdiamonds.com preparation and presentation of this report. We consider the interests of employees and other stakeholders, including the This icon refers the reader to further information communities and environment in which we operate, when about the Group’s sustainable development activities making decisions. We believe that the report provides a on the Group’s website at www.gemdiamonds/ balanced and appropriate representation of the Group’s reports.co.za/reports/sd-2021/index.php performance, strategy and material risks and, acting fairly, in good faith, we considered what is most likely to promote the sustainability and success of Gem Diamonds in the long term. This QR code refers the reader to the Group’s The Board approved the Annual Report and Accounts 2020, website www.gemdiamonds.com which includes the Strategic Report on pages 2 to 50 on 10 March 2021. The 439ct Letšeng Icon that was recovered and sold in 2020 is featured on the cover page. 02 03 STRATEGIC ABOUT GEM DIAMONDS CARAT CLARITY REPORT Purpose Vision Unearthing unique possibilities To support, develop and empower our people so that: • a meaningful, sustainable contribution can be made to the countries in which we operate; • our employees can benefit in the short and long term; and • we can deliver long-term value to our shareholders. CUT COLOUR The way we do things (values) Culture Care – We listen and respond responsibly to the needs of At Gem we invest in our workforce to create an our employees, communities and shareholders. We environment where every person is proud to be part of honour our commitments to all stakeholders, which our family. Mutual respect and care are not only shared include the natural environment in which we operate. throughout the Group but extend to the wider society. Trust – We empower our people and trust them to make Individuals are valued for their differences and are decisions that will deliver on our strategy. empowered to thrive, grow and contribute to a common Ethical – We have zero tolerance for bribery and corruption goal, holding themselves and each other accountable for and conduct ourselves in a manner consistent with good delivering on their promises. governance practices. We pride ourselves on being socially and environmentally responsible. Respect – Everyone matters and is treated equally. We cultivate an open and transparent environment where we value the beliefs, ideas and contributions of our employees, communities and shareholders. Flexible and open-minded – We encourage and consider ideas from employees while remaining responsive and agile. Passionate and fun – We enjoy the work that we are fortunate to do and the people we do it with. We seek A purpose and vision extending opportunities to explore and develop while encouraging a work-life balance. beyond financial measures Refer to our Chairperson’s statement on page 10. Gem Diamonds Limited Annual Report and Accounts 2020 Strategic report • Performance review • Governance • Financial statements • Payments to governments • Additional information 04 05 2020 IN REVIEW 2020 IN REVIEW CONTINUED % SALES AND MARKETING Measure 2020 2019 change The Group’s diamond sorting, sales and marketing operation in Belgium focuses on: Average price per carat achieved (US$) 1 908 1 637 17 DIAMOND ANALYSIS AND • maximising the revenue achieved on diamond sales; Revenue (US$ million) 189.6 182.0 4 • developing the Gem Diamonds brand in the market; and Total direct cash cost (excluding waste costs) per tonne treated (LSL) 201.5 181.2 (11) MANUFACTURING Total direct cash cost (including waste costs) per tonne treated (LSL) 326.6 321.8 (1) The Group’s HIGH-TECH ROUGH DIAMOND • enhancing customer relationships. ANALYSIS operation is tasked with: Total operating cost per tonne treated (LSL) 320.2 245.9 (30) Our diamonds are predominantly sold through a tender process. Through mapping EBITDA1 (US$ million) 53.2 41.0 30 • understanding the value of exceptional large and analysis, the value of the Letšeng high-quality diamonds is determined and Profit for the year (from continuing operations) (US$ million) 27.5 15.0 83 high-value rough diamonds through mapping used to achieve the highest rough value THROUGH MULTIPLE SELLING Corporate costs (US$ million) 8.0 9.4 (15) CHANNELS. In 2020, flexible tender processes were introduced to ensure strict 2 and analysis; and Basic EPS (from continuing operations) (US cents) 12.1 5.1 137 compliance with COVID-19 health and safety protocols while ensuring the highest • managing the manufacturing process of Cash and short-term deposits (US$ million) 49.8 11.4 337 obtainable market prices were achieved. Cash generated from operating activities (US$ million) 96.2 55.5 73 selected diamonds through third-party Drawndown bank facilities (US$ million) 15.2 21.6 30 manufacturers. The Group’s electronic tender platform provides an enhanced experience for clients Net cash/(debt)3 (US$ million) 34.6 (10.2) 439 Baobab Technologies (100% ownership) and significantly increases internal efficiencies in the sales and marketing function. Available bank facilities (US$ million) 60.8 69.9 (13) Gem Diamonds Marketing Services (100% ownership) Business Transformation benefits delivered (US$ million) 79.2 54.9 44 Capital expenditure (US$ million) 1.6 9.7 84 TECHNOLOGY AND Ore tonnes treated (millions) 5.4 6.7 (19) INNOVATION Waste tonnes mined (millions) 15.6 24.0 (35) UNITED KINGDOM This Cyprus company houses the BASED HEADQUARTERS Group’s innovation and technology research and development projects The Group’s holding company which is and related intellectual property listed on the London Stock Exchange and ISO 14001 (environmental management) certification Yes Yes – rights. ISO 45001 (occupational health and safety) certification Yes Yes – oversight of Governance structures and the Board’s strategic plans. Gem Diamonds Innovation Services (100% ownership) GHAGHOO Fatalities 0 1 (100) Major or significant stakeholder incidents 0 0 – Underground diamond mining development in Botswana, Lost time injuries (LTIs) 1 7 (86) which was placed on care and maintenance in 2017 and is Lost time injury frequency rate (LTIFR) (%) 0.04 0.28 (86) classified as a discontinued operation held for sale. Corporate social investment (US$ million) 0.3 0.8 (63) Gem Diamonds Botswana (100% ownership) LETŠENG Average employees (including contractors) 1 702 1 748 (3) Our flagship open pit diamond mine is the HIGHEST Skills development (training hours) 13 101 30 816 (57) TECHNICAL AND ADMINISTRATIVE ACHIEVING AVERAGE US$ PER CARAT KIMBERLITE SERVICES MINE IN THE WORLD. This operation in Lesotho focuses on mining South African subsidiary providing technical support across and processing ore efficiently and safely from its the entire value chain. Carats
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