RNS Number:7259C
Firestone Diamonds PLC
27 April 2001
FIRESTONE DIAMONDS PLC
Unaudited Interim Results for the six months to 31 December, 2000
HIGHLIGHTS
* Production increased 102% from #227,916 to #460,891
* Profit before tax increased 139% from #113,723 to #271,650
* Operating profit and positive cash flow from South African
operations
* Supply deficit in worldwide diamond market and 4% annual price rises
forecast for next ten years
* Avontuur Mine
- 43% increase in diamond production to 6,429 carats compared to the same
period last year
- 9% increase in average gem quality diamond prices to $114 per carat over
past 9 months
* Oena Mine
- 200 carats of large, high quality diamonds recovered from pilot production
- sample parcel sold for average price of $677 per carat
- development work complete and ramp-up to full scale production under way
* Exploration
- continued positive results from intensive sampling programme at Mopipi
- planned expansion into Namibia
The period saw continued good progress in the development of Firestone's
mining operations and exploration projects. Results show a 102% increase in
production and a 139% increase in pre tax profits compared to the same period
last year.
Production from the Avontuur Mine increased by 43% to 6,429 carats compared to
the same period last year. Cash flow from Avontuur financed all South African
overheads and exploration expenditure during the period, and also contributed
significantly to development costs at the Oena Mine. Development work at Oena
continued and was substantially completed during the period. Pilot production
has confirmed the presence of large, high quality diamonds at Oena, with 200
carats recovered to date, averaging over 1.3 carats per stone. Exploration at
Avontuur and Oena continued during the period and resulted in the discovery of
new potential high grade deposits at both mines. These deposits will be
evaluated in the coming year.
There was an increased focus on Mopipi during the period, and exploration
continued to produce very encouraging results. An intensive follow-up
sampling programme produced the highest kimberlitic indicator mineral counts
obtained to date and resulted in the recovery of two diamonds. Results
continue to indicate the potential for the discovery of a new diamondiferous
kimberlite field at Mopipi, which could be of substantial potential commercial
significance.
The strength in the rough diamond market continued during the period, with De
Beers' sales for 2000 reaching a new record of $5.7 billion, an 8% increase on
the previous record of $5.2 billion in 1999. Prices for gem quality rough
diamonds have remained strong into 2001, and the outlook for prices for both
Avontuur and Oena goods is good for the remainder of the year. The longer
term outlook for diamond prices is very positive, as current estimates by De
Beers indicate that the diamond market will experience a supply deficit for
the next ten years, with prices projected to rise at an annual rate of 4% over
that period.
The most significant recent development in the diamond business was the
launching in February of a bid by a consortium comprising Anglo American, the
Oppenheimer family and Debswana to take De Beers private. The bid is seen as
a strong vote of confidence in the diamond business by the consortium and De
Beers management, who have stated that, should the bid be successful, they
plan no significant changes in corporate strategy or direction.
Mining & Development
Oena Mine
The Oena Mine is located on the lower Orange River, in a well established
diamond producing area which produces diamonds comparable to the best in the
world, typically selling at prices between $700-$900 per carat. The Oena Mine
covers 22,000 acres, and extends in a 4.8 kilometre wide strip along 15
kilometres of the Orange River.
Detailed mapping, drilling and bulk sampling carried out at Oena have
identified a resource of more than 40 million tonnes of diamondiferous gravel
with an estimated overall grade of 0.5 carats/100 tonnes, giving a potential
resource of 200,000 carats. With an estimated diamond value of $880 per
carat, the in situ value of the deposits is approximately $175 million.
Most of the activity at Oena during the period focused on preparing
earthmoving equipment and the main gravel processing plant for commercial
scale mining operations. Modifications to the main processing plant were
scheduled to be completed in early 2001 but were delayed by two months due to
delays in equipment availability. These problems were resolved by April and
the processing plant is now operational, with ramp-up to full scale production
currently underway.
Pilot production continued through the period, with the objective of
evaluating and prioritising proposed new mining areas. Over 200 carats have
been recovered during pilot production to date. Diamonds recovered have been
of high quality and large size, averaging over 1.3 carats per stone. Diamonds
larger than 2 carats accounted for more than 57% of total production. A
sample parcel of 141 carats was sold and achieved an average price of $677 per
carat. Special stones sold in this parcel included stones of 10.62, 8.13,
5.74 and 4.67 carats, which sold for $1,200, $1,650, $1,300 and $1,150 per
carat, respectively. As higher volumes of gravel are mined and processed we
anticipate that the average size and value of production will increase towards
the expected levels of 2 carats per stone and $880 per carat.
An extensive programme of drilling commenced in June with the objective of
evaluating the substantial exploration potential at Oena. Approximately 1,100
metres of reverse circulation and percussion drilling were carried out during
the period, resulting in the delineation of a substantial new deposit
estimated to contain more than 1 million tonnes of diamondiferous gravels.
Previous sampling of these gravels produced 854 carats at an average size of
2.68 carats per stone and a grade of 1.5 carats per hundred tonnes, more than
3 times the estimated grade elsewhere at Oena. As this deposit is considered
a high priority target, mine plans are being revised in order to allow the
evaluation and exploitation of this deposit in the coming year. Similar high
grade deposits are believed to occur elsewhere at Oena, and exploration will
continue with the objective of identifying and evaluating this potential.
Avontuur Mine
The Avontuur Mine covers approximately 2,600 acres and is located near the
coastal town of Hondeklip Bay in Namaqualand. Hondeklip Bay is a well
established alluvial diamond producing area and hosts De Beers' Koingnaas Mine
and Trans Hex's Hondeklip Bay Mine, both of which have been producing for
approximately 20 years.
Production for the period increased by 43% to 6,429 carats compared to the
same period last year, despite Treatment Plant 2 being shut down in November
and December for upgrading and repairs, and work on a new Dense Media
Separation (DMS) plant causing additional disruptions in gravel processing.
During the period a decision was made to expand the capacity of the gravel
treatment plants at Avontuur through the introduction of a new DMS plant. A
second hand DMS plant was acquired in October and work on modifications to the
plant commenced in November. Structural and steelwork modifications required
to integrate the DMS plant with Treatment Plant 1 also commenced during the
period. This work has been delayed by adverse weather conditions and is
expected to be completed by mid-2001.
Diamonds produced during the period continued to be approximately 85% gem
quality, with the average size increasing slightly to 0.22 carats per stone.
Demand for Avontuur goods remained strong during the period, with average
prices achieved for gem quality diamonds staying unchanged at $105 per carat.
Since the end of the period, shortages of Avontuur-type goods in the market
have resulted in prices increasing 9% to approximately $114 per carat. Prices
are expected to continue to remain firm for the rest of the year.
A new drilling programme was started in December, with the primary objective
of delineating a highly promising gravel deposit which had been discovered to
the east of the current mining areas last year. Analysis of material
recovered from this deposit indicates a potential grade substantially higher
than from current mining areas. Drilling and bulk sampling are planned to
fully evaluate the deposit in the coming year. If results of this evaluation
confirm its potential, it will be brought into production immediately.
The Company is still awaiting prospecting permits over new areas which have
been applied for in the Hondeklip Bay area. Exploration will start on these
areas as soon as the permits are granted.
Exploration
Botswana
The Mopipi joint venture project covers 2,000 square kilometres and is located
about 50 kilometres west of De Beers' major Orapa Mine in Botswana. Botswana
is a stable country with good infrastructure and is the world's largest
producer of diamonds by value, with annual production of over 20 million
carats worth over $1.6 billion. Botswana is considered to be the best country
in the world to explore for kimberlite - the primary source rock for diamonds
- and it is likely that further discoveries will be made there.
The pace of exploration in Mopipi increased significantly during the period.
A high density sampling programme was started with the objective of confirming
results on the targets identified to date and providing more detailed
information to enable drilling targets to be selected and prioritised. During
the period approximately 1,000 samples were taken, from which kimberlitic
indicator minerals were recovered and evaluated. These samples produced a
number of clusters of very high indicator mineral counts, with one sample
returning 88 grains of kimberlitic pyrope garnet, the highest count recovered
from sampling to date.
Analysis of the dispersion patterns of the indicator minerals shows good
correlation with ground geological mapping and photo features. These features
are considered high priority drilling targets. Chrome diopside was recovered
in a number of samples, indicating that the sample locations are close to a
kimberlitic source. One sample which gave a garnet count of 28 grains
returned a clear, white macrodiamond, weighing 0.07 carats. Another sample
located several hundred metres away returned a garnet count of 12 grains and a
microdiamond. This brings the total number of diamonds recovered during
sampling to four.
The high-density sampling programme is still ongoing. Once it has been
completed and results have been analysed, drilling will commence. Work
completed during the period continues to provide strong evidence of the
presence of diamondiferous kimberlite in the Mopipi area, and we remain
optimistic about the potential for the discovery of a new kimberlite field.
South Africa
The Groen River Valley project covers an area of approximately 74,000 acres of
the lower reaches of the Groen River in Namaqualand. The Groen River Valley
project is significant because of the high quality and large size of diamonds
that have been mined in the area, which are similar in quality to production
from the Orange River. The Groen River has the potential to become an
important new alluvial diamond producing region.
Work on the Groen River Valley project during the period was limited as staff
and equipment were deployed at the Oena Mine to assist in re-establishing
mining operations there. Ground mapping was carried out to identify targets
for the next phase of drilling and sampling, which is expected to start in the
next few months.
Namibia
Namibia, which is situated on South Africa's north west border, is a
substantial diamond producing country and has a democratically elected and
stable government. As it is within close reach of the Company's existing
operations in Namaqualand, the Company has decided to expand its exploration
activities into Namibia. During the period a number of diamond exploration
opportunities in Namibia were reviewed and evaluated. This work is continuing
and is expected to result in the acquisition of exploration rights during the
coming year.
Outlook
With production from Oena expected to come on stream shortly, increasing
production from Avontuur, and the exceptional potential of Mopipi and our
other exploration projects, we remain confident about the Company's prospects
for continued growth and development. We will continue to investigate new
diamond mining and exploration projects, both through internal development and
acquisition, and look forward to updating you in this regard in due course.
James F. Kenny
Chairman
27 April 2001
For further information:
Philip Kenny Chief Executive 020 7370 6452/ 07831 324 645
Laurence Read 020 7324 8888
Golin/Harris Ludgate
Firestone Diamonds plc
Unaudited Interim Consolidated Profit and Loss Statement
For the six months to 31 December, 2000
6 months to 31 6 months to 31 12 months to
December, 2000 December, 1999 30 June, 2000
# # #
Unaudited Unaudited Audited
Turnover 443,466 274,856 765,917
Change in stocks of 17,425 (46,940) (31,332)
finished goods
and in work in progress
Production 460,891 227,916 734,585
Other operating income (22,815) - -
Raw materials and (168) (29,812) (55,368)
consumables
Staff costs (49,372) (42,876) (88,578)
Depreciation and (51,645) (18,906) (64,723)
amortisation
Operating profit before 336,891 136,322 525,916
administrative costs
Other operating charges (71,271) (32,561) (146,660)
Operating profit 265,620 103,761 379,256
Interest receivable and 6,700 9,962 34,201
similar income
Interest payable and (670) - (208)
similar charges
Profit on ordinary 271,650 113,723 413,249
activities before
taxation
Deferred tax on profit (19,858) (41,595) (126,389)
on ordinary activities
Profit on ordinary 251,792 72,128 286,860
activities after
taxation
Minority interests (2,838) - 1,121
Retained profit for the 248,954 72,128 287,981
period
Earnings per share
Basic profit per share 0.82p 0.31p 1.10p
Diluted profit per 0.76p 0.31p 1.10p
share
Turnover is wholly derived from continuing activities.
Notes:
1. The financial statements have been prepared in accordance with
applicable UK accounting standards and under the historical cost convention.
The principal accounting policies of the group are set out in the group's 2000
annual report and financial statements.
2. The financial information set out above does not constitute
statutory accounts as defined in section 240 of the Companies Act 1985.
Statutory accounts for the twelve months to 30 June, 2000, on which the report
of the auditors was unqualified and did not contain a statement under section
237 of the Companies Act 1985, have been filed with Registrar of Companies.
3. The earnings per share has been calculated on the basis of the
weighted average number of shares in issue for the period of 30,363,078.
4. The directors are not declaring a dividend for the period.
5. Copies of this report are being sent to all shareholders. Additional
copies will be available to the public from the offices of Bell Lawrie White,
48 St Vincent Street, Glasgow, G2 5TS and will be posted on the Company's
website at www.firestonediamonds.com.
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