RNS Number:0640O
Firestone Diamonds PLC
18 December 2006
Firestone Diamonds plc
Preliminary statement of results
for the year ended 30 June, 2006
LONDON: 18 December, 2006 - The Board of Firestone Diamonds plc, ("Firestone" or
"the Company"), the AIM-quoted diamond mining and exploration company (ticker:
AIM:FDI), announces preliminary results for the year ended 30 June, 2006.
SUMMARY
Tsabong
* Prospecting licences granted over the Tsabong kimberlite field in
Botswana, one of the largest diamondiferous kimberlite fields in the world,
with 70 known kimberlites, of which 17 are diamondiferous
* Potential for significant economic kimberlite discovery
. 10,000 metres of exploration drilling and 6,000 metres of core drilling
planned for 2007
. Three large kimberlites discovered in November 2006 - 22, 18 and 15 hectares
Jwaneng and Orapa
. Firestone is the largest holder of diamond exploration rights around the
Orapa and Jwaneng mines; holdings doubled to 17,000 square kilometres during
the year
. De Beers conducting Zeppelin surveys over Firestone ground in Jwaneng;
initial targets to be drilled in H1 2007
. Extensive exploration work carried out by De Beers and Firestone in Orapa
area; geophysics and drilling to continue in 2007
Groen River Valley
. Thirteen deposits identified in the project area
. High quality gem diamonds recovered from bulk sampling on HL deposit
. Mobile sampling plant to be erected
. Bulk sampling planned on GR2 deposit in H1 2007
Bonte Koe Mine
. Joint mine development with De Beers
. Operation expected to produce over 600,000 carats over 6 years
. Production commenced in August 2006
. Expected to produce average #3.5 million revenue and #2 million
operating profit per annum at full capacity
Financial
. Turnover for H2 2006 in line with H1 06; turnover for FY 2006 down
36% due to limited production at Avontuur
. Operating loss of #0.5 million due to development costs relating to
Buffels River project
. Turnover expected to increase 50% in H1 2007; substantial increase
expected for FY 2007
. Liquid assets of #10 million - #4 million in cash and #6 million
shareholding in African Diamonds plc
Outlook
. Fundamentals in rough diamond market remain very strong; diamond
prices expected to increase in 2007
. Mining operations focused on new opportunities with De Beers close
to existing operations
. Applications pending for new exploration areas in Botswana and South Africa
Dear Shareholder,
The past year has seen good progress in the growth and development of
Firestone's exploration and mining project portfolio.
Exploration Highlights
Tsabong, Botswana
The most notable development in respect of Firestone's exploration activities
has been the significant expansion of our activities in Botswana. During the
year we doubled the size of our licence holdings in the Orapa and Jwaneng areas
to 17,000 square kilometres, extending our position as the largest holder of
diamond exploration rights around the major Orapa and Jwaneng mines. The
granting of licences in October 2006 over 5,000 square kilometres covering the
entire Tsabong kimberlite field was an important strategic development for the
Company, as Tsabong is one of the largest diamondiferous kimberlite fields in
the world. Tsabong contains 70 known kimberlites, of which 17 have been proven
to be diamondiferous, including the 180 hectare M1 kimberlite, which is one of
the largest known diamondiferous kimberlites.
We believe that the potential for an economic discovery at Tsabong is good.
None of the previously known kimberlites have been evaluated on an adequate
scale or with modern techniques. A detailed evaluation programme will be
carried out on these kimberlites, with approximately 6,000 metres of core
drilling planned in 2007 to recover material for microdiamond, mineral chemistry
and petrographic analysis. The Company plans to carry out approximately 10,000
metres of exploration drilling on selected kimberlite targets by the end of
2007, and we believe that there is good potential for the discovery of new,
large-tonnage diamondiferous kimberlites.
Rapid progress has been made at Tsabong since exploration commenced in November
2006, with the discovery of three large kimberlites, with estimated sizes of 22,
18 and 15 hectares, respectively. This is a significant achievement by our
exploration team, and with many more targets to drill we expect to continue to
make new discoveries when drilling resumes in January 2007.
With rough diamond prices estimated to have tripled since the Tsabong field was
discovered in the early 1980's, the threshold for economic viability in the area
has been reduced substantially. A kimberlite in Tsabong with a moderate grade
of 20 cpht and average quality diamonds of $100 per carat would support a
large-scale, profitable mining operation, and we believe that such an objective
is achievable.
Jwaneng & Orapa, Botswana
Good progress was also made at the Company's exploration projects in the Jwaneng
and Orapa areas, the major development being the introduction of De Beers' new
Zeppelin Airborne Gravity Gradiometer system. The Zeppelin system produces a
five to ten-fold improvement in data quality compared to other airborne gravity
systems. De Beers started conducting Zeppelin surveys over Firestone's Jwaneng
joint venture areas in mid 2006, and drilling of targets identified by these
surveys is expected to commence in the first half of 2007. In the Orapa area,
drilling continued on targets identified by geophysical surveys conducted by De
Beers, and 1 new kimberlite was discovered during the year. Results have been
received from analysis of material from kimberlites BK18, BK53 and BK56. No
further work is planned on these kimberlites at this time. Further exploration
drilling is planned in the Orapa area in 2007.
Groen River Valley, South Africa
Exploration continued during the year at the Groen River Valley joint venture
project with De Beers in South Africa, where previous exploration has proven the
presence of large, high quality diamonds. The HL deposit was the first of
thirteen deposits in the project area selected for sampling. Although no
diamonds were recovered from large diameter auger sampling carried out on the
central part of the HL deposit, bulk sampling on the southern part of the
deposit since the end of the year has produced five high quality diamonds
weighing 1.11 carats. Evaluation of the other 12 deposits in the project area
is continuing, and drilling and sampling will be carried out on the second
deposit, GR2, in the first half of 2007. A mobile sampling plant is being
erected in the Groen River Valley and is expected to be in operation in Q1 2007.
The Company expects that the next phase of sampling in the Groen River Valley
will allow the Company to make substantial progress towards establishing the
economic potential of the area.
Other projects
The Company is continuing to pursue several other exploration projects. The
Company has pending applications for prospecting rights for a number of areas in
South Africa and Botswana that are believed to have good exploration potential.
It is expected that these applications will lead to new permits being granted in
2007. Progress at our kimberlite exploration project in the US has been slower
than expected, but an update on exploration will be provided in Q1 2007.
Mining Operations Highlights
Bonte Koe, South Africa
The primary focus of the Company's mining operations was at Bonte Koe, which is
operated by the Company's black-empowerment subsidiary, African Star Minerals.
The most important development during the year was the signing of an agreement
with De Beers in May 2006 to develop a new mining operation on the Buffels River
in South Africa. The new mining operation will be based around the Bonte Koe
Mine, and will exploit deposits on the Buffels River over which De Beers holds
mining rights.
Under the terms of the agreement Firestone is expanding the capacity of the
treatment plant at Bonte Koe in order to process gravel mined by De Beers from
the Buffels River. This agreement marks a major milestone for Firestone
Diamonds as it provides the Company with assured revenue and cash flow for the
duration of the Buffels River project. The new mining operation is expected to
produce approximately 600,000 carats over 6 years, and to provide Firestone with
average annual revenue of approximately #3.5 million and annual operating
profits of #2 million. Firestone's revenue and profits from the project could
increase further through a potential increase in mineable resources in the
Buffels River area and profit sharing arrangements with De Beers.
Processing of De Beers' gravel commenced on a limited basis in August 2006 and
has continued while work on the plant expansion was being undertaken. This work
is ahead of schedule, and commissioning is expected to take place in January
2007.
Oena and Avontuur, South Africa
Negotiations with mining contractors to take over operations at the Oena Mine on
a revenue-sharing basis continued during the year. There has been considerable
interest from potential contractors due to the large gravel resource at Oena and
the exceptionally high value of diamonds produced, which was an average of over
$1,500 per carat during the year. However, the Company has not yet been able to
secure satisfactory terms, and therefore has continued to maintain its own
mining operations at Oena. The planned expansion of mining operations at
Avontuur was placed on hold pending approval from the Department of Minerals &
Energy of the acquisition of the adjoining Hondeklip Bay Mine from Trans Hex,
which is now expected in the first half of 2007.
Financial
Turnover for the second half of the year continued in line with the first half,
as expected. Although production at Bonte Koe increased during the year,
limited mining operations at Avontuur resulted in turnover for the full year
being 36% lower compared to the previous year. Operations showed a loss for the
year, primarily as a result of increased costs at Bonte Koe relating to the De
Beers Buffels River joint venture.
The Company has seen a substantial improvement in turnover since the end of the
year, principally as a result of the commencement of production at Bonte Koe
from the Buffels River project, and turnover for the first half of the current
financial year is expected to increase more than 50% compared to last year.
Turnover for the full year is also expected to be substantially higher than last
year as the expanded Bonte Koe plant ramps up to full capacity.
During the year Firestone acquired a 6.5% interest in African Diamonds plc in
exchange for issuing #2.8 million in new shares. African Diamonds has a joint
venture with De Beers over ground which adjoins Firestone's Orapa and Mopipi
projects. African Diamonds' share price has increased significantly following
positive results from evaluation of the AK6 kimberlite, which is now likely to
be developed into a new mine. The Company currently has liquid assets of over
#10 million, with #4 million in cash and a shareholding in African Diamonds plc
worth approximately #6 million.
Diamond market
After several years of strongly rising prices across all segments of the rough
diamond market, prices softened somewhat in 2006, primarily as a result of De
Beers selling down their remaining stockpiles at the end of 2005. This
primarily affected the lower end of the market, while continued shortages of
large, high quality goods, such as those produced at Oena, resulted in further
price increases during the year for these goods.
The fundamentals of the diamonds business are very positive, with substantial,
sustained shortfalls in supply projected for at least the next five to seven
years. With De Beers' stockpiles now eliminated, we expect to see rough diamond
prices begin another period of sustained increases in 2007.
Outlook
In terms of Firestone's exploration projects, our primary focus for the next
year will be on Tsabong. With 70 kimberlites already proven in our licence area
and the prospects of more discoveries being made when exploration resumes in
2007, we believe that Tsabong has the potential to produce a major economic
discovery. The Company intends to progress exploration and evaluation
activities at Tsabong as rapidly as possible and expects to make significant
progress towards establishing the economic potential of the area by the end of
2007. The Company will also continue to focus on its other large scale
exploration projects around the Orapa and Jwaneng mines and at the Groen River
Valley.
The recent commencement of production at the Buffels River project with De Beers
was a major milestone for the Company. With full production expected to be
reached in 2007, the Company will start to generate significant revenue and cash
flow. The attractions of relatively low risk, predictable revenues from joint
venture mining projects such as this Buffels River are evident. Having proven
that we have the capability to design, build and operate mining operations to
the standard required by De Beers, we have shifted the focus for our mining
resources to other similar opportunities with De Beers close to our existing
operations in Namaqualand. We have made good progress in this regard and hope
to be in a position to update shareholders on further developments soon.
The Company's financial position is secure, with a current cash position of over
#4 million, approximately #6 million in shares in African Diamonds and
increasing cash flow from our mining operations.
Firestone has made considerable progress over the past year. With a highly
prospective exploration project portfolio, the financial resources to develop
the portfolio and a very experienced technical and management team in place, we
consider the Company to be one of the best positioned junior companies in the
diamond sector.
Firestone is well placed to take advantage of what we believe will be several
years of rising prices in the rough diamond market. We remain confident about
the Company's long term prospects and believe that we can achieve our objective
of becoming a leading mid-tier diamond mining and exploration company.
Finally, I would like to record the Board's appreciation of the continued
dedication and commitment of our senior management and staff, who have
contributed to the Company's continued growth and development over the past
year.
James F. Kenny
Chairman
15 December 2006
For further information:
Philip Kenny, Firestone Diamonds +44 20 8834 1028 / +44 7831 324 645
Laurence Read/Joss Simson, Conduit PR +44 20 7429 6600 / +44 7979 955 923
Jamie Cumming, Bell Lawrie +44 141 314 8103 / +44 7768 044 620
www.firestonediamonds.com
FIRESTONE DIAMONDS PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 30 JUNE 2006
2006 2005
# #
Turnover 598,290 940,706
Change in stocks of finished goods
and in work in progress (41,007) (11,728)
Production 557,283 928,978
Raw materials and consumables (189,813) (148,795)
Staff costs (141,198) (388,975)
Depreciation and amortisation (184,557) (236,359)
Other operating charges (588,250) (371,186)
Operating loss (546,535) (216,337)
Interest receivable and similar income 209,983 43,177
Interest payable and similar charges (136,963) (149,409)
Loss on ordinary activities before taxation (473,515) (322,569)
Deferred tax on loss on ordinary activities 158,497 96,899
Loss on ordinary activities after taxation (315,018) (225,670)
Minority interests 144,859 21,349
Loss for the year (170,159) (204,321)
Loss per share
Basic loss per share (0.3)p (0.5)p
Diluted loss per share (0.3)p (0.5)p
Turnover is wholly derived from continuing activities.
CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
FOR THE YEAR ENDED 30 JUNE 2006
# #
Loss for the financial year (170,159) (204,321)
Currency translation differences (1,521,627) (824,826)
Deferred tax on exchange differences 279,173 125,705
Total recognised gains and losses for the year (1,412,613) (903,442)
FIRESTONE DIAMONDS PLC
CONSOLIDATED BALANCE SHEET
30 JUNE 2006
2006 2005
# # # #
FIXED ASSETS
Intangible assets 8,929,348 5,950,744
Tangible assets 11,255,607 11,625,753
Investments 3,078,550 230,439
23,263,505 17,806,936
CURRENT ASSETS
Stocks 64,570 105,793
Debtors 1,886,790 598,898
Cash at bank and in hand 4,750,506 2,112,261
6,701,866 2,816,952
CREDITORS
Amounts falling due within
one year (940,193) (1,940,437)
NET CURRENT ASSETS 5,761,673 876,515
TOTAL ASSETS LESS CURRENT LIABILITIES 29,025,178 18,683,451
CREDITORS
Amounts falling due after one year (450,130) (718,815)
PROVISIONS FOR LIABILITIES
AND CHARGES
Other provisions (580,909) (1,056,289)
Deferred tax (323,328) (375,309)
(904,237) (1,431,598)
NET ASSETS 27,670,811 16,533,038
CAPITAL AND RESERVES
Called up share capital 11,151,581 9,167,594
Share premium account 19,132,921 8,383,823
Merger reserve (1,076,399) (1,076,399)
Profit and loss account (1,331,890) 80,723
EQUITY SHAREHOLDERS' FUNDS 27,876,213 16,555,741
Minority equity interests (205,402) (22,703)
27,670,811 16,533,038
FIRESTONE DIAMONDS PLC
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 30 JUNE 2006
2006 2005
# # # #
Net cash (outflow)/inflow from operating (2,401,275) 1,382,286
activities
Returns on investments and
servicing of finance
Interest received 209,983 43,177
Interest element of finance lease payments (34,049) (46,790)
Interest paid on loans (102,914) (87,378)
Net cash inflow/(outflow) from returns on 73,020 (90,991)
investments and servicing of finance
Capital expenditure and financial investment
Payments to acquire intangible fixed assets (3,569,192) (2,411,052)
Payments to acquire tangible fixed assets (1,112,274) (1,804,860)
Receipts from sales of tangible fixed assets 118,169 -
Net cash outflow from capital expenditure (4,563,297) (4,215,912)
and financial investment
Net cash outflow before use of (6,891,552) (2,924,617)
liquid resources and financing
Liquid resources
Amounts paid into short term deposits (2,066,694) -
Net cash outflow from use of liquid resources (2,066,694) -
Financing
Repayment of long term loans (210,854) (121,008)
Issue of ordinary share capital 9,884,975 4,943,319
Finance lease payments (104,991) (52,483)
9,569,130 4,769,828
Increase in cash 610,884 1,845,211
Notes to the preliminary statement of results for the year ended 30 June 2006
1. Basis of preparation
The financial statements have been prepared in accordance with applicable UK
accounting standards and under the historical cost convention.
2. Loss per share
Basic loss per share is based on a loss of #170,159 (2005: loss of #204,321) and
a weighted average number of shares in issue of 52,383,903 (2005: 43,837,579).
The diluted loss per share has been calculated on the same basis as basic loss
per share because the effect of the potential ordinary shares (share options)
reduces the net loss per share and is therefore anti-dilutive.
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 2006 statutory
financial statements, which were approved by the Board on 15 December 2006. The
auditors have reported on these accounts; their report is unqualified and does
not contain statements under section 237(2) or (3) of the Companies Act 1985.
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 MWB Business Exchange, 78
Cannon Street, Fourth Floor, London EC4N 6NQ on 29 January, 2007 at 12.00 p.m.
5. Dividends
The directors do not recommend the payment of a dividend for the period.
6. Qualified person review
The information in this statement has been reviewed by Mr. Tim Wilkes, B Sc, Pr
Sci Nat, who is a qualified person for the purposes of the AIM Guidance Note for
Mining, Oil and Gas Companies. Mr. Wilkes is Chief Operating Officer of
Firestone Diamonds plc and has over 25 years experience in diamond exploration,
mineral resource management and mining. Mr. Wilkes is a member of the
sub-committee for diamonds of the South African Mineral Resource Committee
(SAMREC).
This information is provided by RNS
The company news service from the London Stock Exchange
END
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