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Gem Diamonds Scraps Bonuses After Weak 2016

Mar 15, 2017 10:58 AM   By Rapaport News
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RAPAPORT... Gem Diamonds’ senior managers missed out on their performance-related pay last year, as the miner slid to a loss in 2016.

Clifford Elphick, Michael Michael and Glenn Turner – respectively the company’s chief executive officer, chief financial officer and legal chief – did not get repeats of the bonuses they received in 2015.

The decision by the rough producer’s remuneration committee came after revenue fell 24 percent to $189.8 million in 2016 due to a decline in the number of large diamonds the company managed to extract at its Letšeng mine in Lesotho.

The group sank to a loss of $144.1 million after one-time expenses – such as those related to the suspension of its Ghaghoo mine in Botswana – compared to a profit of $77.6 million a year earlier. Before the deduction of those expenses, profit stood at $32.4 million, a 39-percent decline.

Gem Diamonds’ rough production from the high-value Letšeng deposit was marginally lower at 108,206 carats, versus 108,579 a year earlier, but the number of stones exceeding 100 carats fell to five from 11. As a result, the average selling price dropped 26 percent to $1,695 per carat. Meanwhile, the company placed the Ghaghoo mine on care and maintenance due to low prices.

“The lack of large-value diamonds recovered during the year, coupled with weak diamond prices amid continued poor market conditions, contributed to disappointing results in 2016,” said Mike Salomon, chairman of the remunerations committee. “In the context of challenging operating conditions and the group’s performance in 2016, the executive directors and the remuneration committee jointly agreed that no bonus should be paid to the executive directors for 2016.”

While Elphick (pictured) did not receive an annual bonus, his base salary increased to $566,747 (GBP 464,802) from $550,240 (GBP 451,264) the previous year. The CEO's bonus in 2015 amounted to $412,381 (GBP 338,203).

The committee also decided not to raise the base salaries of the three executives for 2017, “in light of the current environment,” Salomon said.

“The decline in 2016 in the recovery of diamonds larger than 100 carats has had a disappointing impact upon revenue and cash flow,” Elphick said about Letšeng. “This recovery rate is consistent with the normal, short-term variability of the resource.”
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Tags: bonuses, Botswana, Clifford Elphick, Gem Diamonds, Ghaghoo, Glenn Turner, Michael Michael, Production, Rapaport News, Rough Diamonds, Salaries
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