RNS Number:6163V
Firestone Diamonds PLC
12 December 2000
Firestone Diamonds plc
Preliminary statement of results
for the year ended 30 June, 2000
HIGHLIGHTS
- Turnover increased from #84,409 to #765,917
- Continued strength and increasing prices in the rough diamond
market
- Avontuur Mine
- 543% increase in diamond production to 12,989 carats
- 8% increase in gem quality diamond prices to $105 per carat
- operating profit and positive cash flow
- Oena Mine
- acquisition of 87.5% interest in the mine
- pilot production commenced
- preparations under way for full scale production in early 2001
- Increasing exploration acreage in Botswana and South Africa and
positive results from exploration
LONDON: 12 December, 2000 - The Board of Firestone Diamonds plc,
("the Company"), the UK-based diamond mining and exploration
company, announces preliminary results for the year ended 30 June,
2000.
The past year was one of continued growth and progress for
Firestone. Production from the Avontuur Mine increased
substantially, generating sufficient cash flow to finance all of
the Company's operational and exploration expenditures in South
Africa during the year and contributing significantly to
development costs at the Oena Mine. The acquisition of an 87.5%
interest in the Oena Mine was the most significant development
during the year. The Oena Mine is an exceptional project with
excellent exploration potential, and is estimated to contain a
substantial resource of large, high quality diamonds. Good progress
was made at the Company's exploration projects in South Africa and
Botswana and positive results were obtained. Demand for rough
diamonds was exceptionally strong, resulting in a number of price
increases during the year.
Mining & Development
Oena
In February, we made our most important acquisition since the
Company floated on the Alternative Investment Market (AIM) of the
London Stock Exchange in 1998, with the purchase of an 87.5%
interest in the Oena Mine, located on the lower Orange River in
South Africa, an area where the Company has extensive expertise.
This acquisition was significant for a number of reasons. The
Orange River area is 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 adds significantly to the value of our project portfolio,
containing an estimated resource of 200,000 carats. Previous
operations at Oena produced over 30,000 carats, with an average
stone size of approximately 2 carats, the largest stone recovered
being 70 carats. The Company recovered its first diamonds at Oena
in April. Pilot production has been ongoing since then with the
objective of evaluating and prioritising proposed mining areas. A
substantial investment was made in new earthmoving equipment and in
upgrading the gravel processing plant in preparation for commercial
scale mining. This work is approaching completion, and commercial
scale mining is expected to commence in early 2001, following which
we expect Oena to make a significant contribution to the Company's
profits and cash flow over its projected ten-year life.
The Oena Mine has significant additional exploration potential. A
programme of reverse circulation and percussion drilling was
started during the year with the objective of identifying and
evaluating new gravel deposits. Strong demand for Orange River
production resulted in prices increasing by more than 10% during
the year, and with these shortages expected to continue for the
foreseeable future, further price rises can be expected.
Avontuur
Production from the Avontuur Mine increased 543% over the previous
year to 12,989 carats as a result of the expansion carried out
during that year. Diamonds produced were approximately 85% gem
quality, with an average size of 0.2 carats per stone. The average
price achieved for gem quality production from Avontuur during the
year increased 8% from $97 to $105 per carat, and we expect prices
to continue to remain firm in the coming year. A further expansion
to the capacity of the gravel treatment plants at Avontuur, through
the introduction of a new dense media separation plant, is
currently under way and is expected to be completed in early 2001.
Exploration activity continued at Avontuur and focused on a number
of promising new target areas to the east and north of the current
mining areas.
Exploration
Botswana
Botswana, which is the world's largest producer of diamonds by
value, continued to be the focus for the Company's kimberlite
exploration efforts. During the year we substantially increased
our land position in the Mopipi region, located about 50 kilometres
west of De Beers' major Orapa Mine, from 85 square kilometres to
over 2,000 square kilometres. We were granted two new prospecting
licences, known as Mopipi South and Mopipi West, and entered into
an option agreement over another area in the Mopipi region, known
as Mopipi North. A considerable amount of exploration work was
carried out during the year. This work produced continued positive
results, which indicate that it is likely that diamondiferous
kimberlite is present in the region. As kimberlite pipes typically
occur in clusters, and no kimberlite has ever been discovered west
of Orapa, we are optimistic about the potential for the discovery
of a new kimberlite field.
Most of the exploration work was carried out in the Mopipi South
and Mopipi North areas. In Mopipi South, over 100 target areas
were identified by interpretation and analysis of aerial
photography, satellite imagery and aeromagnetic data. Follow-up
soil sampling identified 9 high priority target areas showing high
anomalous counts of kimberlitic indicator minerals. Similar work
in Mopipi North resulted in the identification of more than 10 high
priority target areas, including one from which a microdiamond was
recovered.
All the high priority targets identified to date are now being
subjected to high density sampling to confirm initial sampling
results and to select and prioritise targets for drilling during
the coming year.
South Africa
The Groen River Valley project is our most important exploration
project in South Africa, primarily due to 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.
Exploration continued at the Groen River Valley during the year,
with continued encouraging results.
During the first half of the year, evaluation of the last of three
high priority target areas that had been identified by previous
work in the area was completed. The gravels tested at this location
were proven to be diamondiferous, as the first two locations tested
had also been. The data obtained from this work significantly
increased our understanding of the geology of the region, and
resulted in the identification of a number of additional areas
through which the target palaeo channels are believed to run. The
Company has applied for prospecting permits for these areas.
Work on the Groen River Valley project was limited during the
second half of the year, as staff and equipment were temporarily
redeployed to the Oena Mine to assist in re-establishing mining
operations there. We expect the staff and equipment to return to
the Groen River Valley once mining operations are established at
Oena in early 2001. We remain confident that the Groen River
Valley has the potential to become an important new alluvial
diamond producing region. With the substantial land position that
Firestone holds in the region, the project has the potential to
make a significant contribution to the Company's future growth.
We have also identified a number of new areas in South Africa with
good exploration potential, for which we have submitted prospecting
permit applications to the Department of Mineral & Energy Affairs.
We expect these permits to be granted during the coming year and
look forward to updating you in this regard in due course.
The Diamond Market
The strength in the rough diamond market continued into the current
year, with De Beers' sales for 2000 forecast to reach a new record
of $5.87 billion, a 12% increase on the previous record of $5.2
billion reached in 1999. Prices for gem quality rough diamonds
increased several times during the year, with sales of Avontuur
production benefiting as a result. Severe supply shortages in
larger size, better quality rough diamonds, such as those produced
at Oena, resulted in significant price increases at this end of the
market.
The year saw some significant developments in the rough diamond
market. As a result of a strategic review, De Beers introduced a
number of changes into their business practices. The most
significant change was a shift in focus from their traditional
approach of supply management, where the De Beers Central Selling
Organisation (CSO) would limit supply to the market to maintain a
balance between overall market supply and demand, to demand
creation. The primary objective of this initiative is to increase
demand for diamonds by raising the advertising to sales ratio for
diamond jewellery from its present level of 0.5%, closer to the
average of about 10% in the luxury products sector. In line with
this initiative, the CSO was renamed the Diamond Trading Company
(DTC). These changes are expected to increase overall demand for
diamonds, which will benefit all producers, including Firestone.
The issue of conflict diamonds - diamonds illegally mined by rebel
organisations in countries such as Sierra Leone and Angola -
received much publicity during the year, with groups such as Global
Witness urging the diamond industry to take all possible steps to
eliminate trade in these diamonds. Conflict diamonds are estimated
to comprise about 4% by value of world diamond production. The
industry has reacted swiftly and responsibly to this problem. Much
progress has been made in addressing this issue through the
development of policies, procedures and controls in order to
identify the country of origin of rough diamonds as they pass
through world markets, and to block trade in diamonds from conflict
zones. Further similar initiatives are expected in coming months
to ensure that the ban on conflict diamonds is properly enforced.
Firestone does not and will not participate in any activities in
conflict zones, and fully supports industry initiatives to prevent
trade in conflict diamonds.
The year was also marked by two De Beers takeover bids. The first,
for emerging Canadian producer, Winspear Diamonds, was successful,
while the second, for Australian miner Ashton Mining, was not, with
De Beers losing out to a counterbid by Rio Tinto. With De Beers'
stockpile estimated to have been reduced to required working levels
of about $2.5 billion, these bids are considered to be indicative
of the strong fundamentals of and prospects for the rough diamond
market. With some analysts predicting a potential supply shortfall
in 2001, the outlook for diamond prices remains positive,
particularly for larger, high quality goods.
Financial
Firestone's financial position remains strong and the Company is
debt free. In February 2000 the Company completed a share placing
to raise approximately #1.5 million. The primary purpose of the
fund raising was to finance the acquisition and development of the
Oena Mine. Increased cash flow from the Avontuur Mine during the
year financed all South African overheads and exploration
expenditure, and also contributed significantly to development
costs at the Oena Mine. We have no further significant capital
commitments in respect of our existing projects, and have
sufficient funds to support current planned exploration programmes.
Results for the period show an increased profit over last year, in
line with expectations.
Management
The Company's management team was significantly strengthened during
the year. We appointed a Regional Operations Manager for
Namaqualand, and hired new managers for the Avontuur Mine and the
Oena Mine, all with extensive experience in mine management and in
alluvial diamond mining. We also expanded our geological team by
the hiring of a senior geologist with extensive experience in
diamond mining and exploration.
Outlook
A consistent and key element of our corporate development strategy
has been to balance our investments between advanced development
and production projects which can provide short term cash flow, and
large scale exploration projects which have the potential to yield
significant reserves of gem quality diamonds. We intend to
continue to maintain this balance in the future.
We have also had a policy of investing only in stable countries
with transparent, open democracies such as South Africa and
Botswana. Over the past year, political and armed conflict
continued in the diamond-rich countries of Angola and Sierra Leone
and spread into the Democratic Republic of Congo. The risk of
investing in such countries remains extremely high, and we will
therefore continue to restrict our future investments to South
Africa, Botswana and similarly safe, stable countries where
attractive diamond exploration and mining opportunities are
available.
We stated last year that we intended to add to our portfolio of
mining and exploration projects, and we have done so during the
year, most notably through the acquisition of our interest in the
Oena Mine. We intend to continue to leverage the Company's
extensive data and expertise to identify low cost, attractive
diamond mining and exploration opportunities, and expect that
additional projects will be brought into the Company during the
coming year.
The rough diamond market and prices are expected to remain strong
during the coming year. With production from Oena expected to come
on stream in 2001, production from Avontuur expected to continue
increasing, and with the considerable potential of our mining and
exploration projects, we remain confident about the Company's
prospects for the future. We have made substantial further
progress during the year towards achieving our objective of
becoming a leading independent diamond producer, and look forward
to another year of strong growth and development.
James F. Kenny
Chairman
11 December 2000
FIRESTONE DIAMONDS PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNT
YEAR ENDED 30 JUNE 2000
2000 1999
# #
Turnover 765,917 84,409
Change in stocks of finished goods
and in work in progress (31,332) 50,601
-------- --------
Production 734,585 135,010
Other operating income - 15,639
Raw materials and consumables (55,368) (29,515)
Staff costs (88,578) (58,782)
Depreciation and amortisation (64,723) (45,119)
-------- --------
Operating profit before administrative costs 525,916 17,233
Other operating charges (146,660) (97,889)
-------- --------
Operating profit/(loss) 379,256 (80,656)
Interest receivable and similar income 34,201 43,070
Interest payable and similar charges (208) (2,599)
-------- --------
Profit/(loss) on ordinary activities before
taxation 413,249 (40,185)
Tax on profit/(loss) on ordinary activities (126,389) (22,674)
-------- --------
Profit/(loss) on ordinary activities after
taxation 286,860 (62,859)
Minority interests 1,121 -
-------- --------
Retained profit/(loss) for the year 287,981 (62,859)
======== ========
Earnings per share
Basic earnings/(loss) per share 1.1p (0.3)p
Diluted earnings/(loss) per share 1.1p (0.3)p
======== ========
Turnover is wholly derived from continuing activities.
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
YEAR ENDED 30 JUNE 2000
# #
Profit/(loss) for the financial period 287,981 (62,859)
Currency translation differences (27,298) (6,504)
-------- --------
Total recognised gains and losses for the
period 260,683 (69,363)
======== ========
FIRESTONE DIAMONDS PLC
CONSOLIDATED BALANCE SHEET
30 JUNE 2000
2000 1999
# # # #
FIXED ASSETS
Intangible assets 5,138,604 2,822,486
Tangible assets 1,604,661 1,609,315
Investments 105,876 29,349
--------- ---------
6,849,141 4,461,150
CURRENT ASSETS
Stocks 45,953 82,140
Debtors 93,435 167,089
Cash at bank and in hand 1,009,529 416,140
--------- --------
1,148,917 665,369
CREDITORS
Amounts falling due within
one year (335,552) (88,470)
--------- ---------
NET CURRENT ASSETS 813,365 576,899
--------- ---------
TOTAL ASSETS LESS CURRENT
LIABILITIES 7,662,506 5,038,049
CREDITORS
Amounts falling due after
one year (14,446) -
PROVISIONS FOR LIABILITIES
AND CHARGES
Other provisions (9,731) (10,513)
Deferred taxation (189,848) (71,050)
--------- ---------
(199,579) (81,563)
--------- -------
NET ASSETS 7,448,481 4,956,486
========== =========
CAPITAL AND RESERVES
Called up share capital 6,072,615 4,596,798
Share premium account 2,213,593 1,402,242
Other reserves (1,076,399) (1,076,399)
Profit and loss account 294,528 33,845
---------- --------
SHAREHOLDERS' FUNDS 7,504,337 4,956,486
Minority interests (55,856) -
---------- --------
7,448,481 4,956,486
========== =========
FIRESTONE DIAMONDS PLC
CONSOLIDATED CASH FLOW STATEMENT
YEAR ENDED 30 JUNE 2000
2000 1999
# # # #
Net cash inflow/(outflow) from
Operating activities 952,043 (239,173)
Returns on investments and
servicing of finance
Interest received 34,201 43,070
Interest element of finance
lease payments (208) -
--------- --------
Net cash inflow from returns
On investments and servicing
of finance 33,993 43,070
Capital expenditure and
financial investment
Payments to acquire
intangible fixed assets (1,062,521) (871,442)
Payments to acquire
tangible fixed assets (231,890) (693,996)
Receipts from sales of
tangible fixed assets - 215,280
Payments to acquire
investments (76,527) (3,965)
---------- --------
Net cash outflow from capital
Expenditure and financial
investment (1,370,938) (1,354,123)
Acquisitions and disposals
Purchase of subsidiary
undertakings (641,936) -
Net cash acquired with
subsidiaries 20,166 -
Payment of deferred
Consideration for
subsidiary undertaking - (119,420)
---------- ---------
Net cash outflow from
acquisitions and disposals (621,770) (119,420)
--------- --------
Net cash outflow before use
of liquid resources and
financing (1,006,672) (1,669,646)
Management of liquid resources
Cash withdrawn from/(placed
on)30 day deposit 313,319 (313,319)
Financing
Issue of ordinary share
capital 1,469,476 2,039,838
Exercise of warrants 119,249 -
---------- ----------
1,588,725 2,039,838
---------- ---------
Increase in cash 895,372 56,873
========= =========
Notes to the preliminary statement of results for the year ended 30
June 2000
1. Basis of preparation
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. Earnings per share
Basic earnings per share is based on a profit of #287,981 (1999:
#62,859 loss) and a weighted average number of shares in issue of
25,970,122 (1999: 19,972,342).
Diluted earnings per share is based on a profit of #287,981 (1999:
#62,859 loss). The weighted number of shares used to calculate
diluted earnings per share incorporates the weighted average number
of shares in issue of 25,970,122 (1999: 19,972,342) plus dilutive
potential ordinary shares arising from share options of 22,835
(1999: nil), totalling 25,992,957 (1999: 19,972,342).
3. Publication of non-statutory accounts
The financial information set out above does not constitute
statutory accounts as defined in section 240 of the Companies Act
1985. The consolidated profit and loss account, balance sheet and
cash flow statement and associated notes have been extracted from
the Company's 1999 statutory financial statements, which were
approved by the Board on 11 December 1999. The financial
statements will be filed with the Registrar of Companies in due
course. The report and accounts will be posted to shareholders in
the near future.
4. Annual General Meeting
The company's Annual General Meeting will be held at 60 St. James's
Street, London, SW1A 1NE on 22 January, 2001 at 12.00 am.
5. Dividends
The directors are not declaring a dividend for the period.
For further information:
Website: www.firestonediamonds.com
Philip Kenny, Firestone Diamonds plc 020 7370 6452/ 07831 324645
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