RNS Number:6887O
Firestone Diamonds PLC
14 December 2001
Firestone Diamonds plc
Preliminary statement of results
for the year ended 30 June, 2001
HIGHLIGHTS
* Group production increased 34% to #987,197
* Avontuur Mine
+ diamond production of 12,951 carats
+ 4% increase in gem quality diamond prices to $109 per carat
+ operating profit and positive operating cash flow
* Oena Mine
+ commercial production commenced
+ 540 carats recovered, at an average of over 2.2 carats per stone
+ average value of production increased 7% to $723 per carat
+ significant discovery at Sandberg
* Mopipi
+ exceptional results from exploration
+ diamondiferous kimberlite likely to be present in area
+ exploration acreage increased 50% to 3,000 square kilometres
* Rough diamond market stable despite global economic slowdown
LONDON: 14 December, 2001 - 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, 2001.
The past year saw continued good progress in the development of Firestone's
mining operations and exploration projects. The primary focus of mining
operations during the year was on the commencement of commercial scale
production at the Oena Mine, which contributed to a 34% increase in group
production compared with last year. The most important developments at the
Company's exploration projects during the year were at Mopipi and Oena.
Exceptional exploration results at Mopipi, have significantly increased our
confidence in the potential presence of diamondiferous kimberlite in our
license areas. A very significant discovery was made at Oena, where the
Sandberg deposit is now expected to make an increasingly significant impact on
production in the next 12-18 months. Cash flow from the Avontuur Mine
continued to finance all South African overheads and exploration expenditure
during the year, and also contributed significantly towards meeting
development costs at the Oena Mine.
Mining
Oena Mine
Most of the activity at Oena during the year focused on mobilising earthmoving
equipment and preparing gravel processing plants for commercial scale mining
operations. Modifications to the main processing plant were completed towards
the end of the year, following which ramp-up to full scale production
commenced. A total of 540 carats has been recovered from bulk sampling and
trial mining, at an average of over 2.2 carats per stone. Production was
valued at $723 per carat, an increase of 7% compared to the previous reported
value of $677 per carat, and is expected to reach the projected value of $880
per carat as production volumes continue to increase.
A very significant potential high grade discovery was made at the Sandberg
terrace during the year. Mapping and drilling have delineated more than 1
million tonnes of diamondiferous gravels, which are expected to produce
average grades of up to 5 carats/100 tonnes, compared to the average grade of
the other deposits at Oena of 0.5 carats/100 tonnes. The Company plans to
bring Sandberg into production in 2002, and this is expected to have a
significant impact on production at Oena. Plans are being put in place to
increase gravel processing capacity to allow Sandberg to be mined in parallel
with the continued mining of the lower grade deposits elsewhere at Oena.
Similar high grade deposits to Sandberg are believed to occur elsewhere at
Oena, and additional drilling will be carried out with the objective of
identifying and evaluating this potential.
Avontuur Mine
Production at the Avontuur Mine was 12,951 carats, almost unchanged from last
year, despite disruptions in gravel processing due to repairs to and upgrading
of the gravel treatment plants. During the year a decision was made to expand
the capacity of the gravel treatment plants at Avontuur by the introduction of
a Dense Media Separation (DMS) plant. This work has been delayed and
commissioning of the DMS is now expected to begin in early 2002.
Diamonds produced during the year continued to be approximately 85% gem
quality, with an average size of 0.22 carats per stone. Demand for Avontuur
production remained strong during the year, with average prices for gem
quality production rising 4% from $105 to $109 per carat. Grades from the main
areas mined during the year ranged from 13 to 108 carats/100 tonnes.
There were some significant exploration successes at Avontuur during the year.
The primary exploration focus was on the SP3 deposit, which was discovered
last year. Drilling results indicate a large resource of gravel and a
potential grade substantially higher than that of current mining areas. The
SP3 deposit will be excavated in early 2002 and, if results confirm its
potential, will be brought into production as soon as possible. In order to
prepare for this deposit to be excavated and processed, mining activities
during the current period have been focused on clearing and processing
stockpiles of lower grade gravels.
Exploration
Botswana
Botswana, which is the world's largest producer of diamonds by value,
continued to be the focus of the Company's kimberlite exploration efforts. The
pace of exploration activity increased substantially during the year, and
produced very strong evidence of the presence of diamondiferous kimberlite in
the Mopipi project area. As kimberlite pipes typically occur in clusters of up
to 40 pipes, we continue to believe that the potential for the discovery of a
new kimberlite field at Mopipi is very good. Such a discovery would be of
substantial potential commercial significance.
A comprehensive follow-up soil sampling programme returned exceptionally high
indicator mineral counts in a number of areas. The Mopipi Dam area, which is
located in the Mopipi Central licence area, produced 11 samples with more than
200 grains of kimberlitic garnet, with the highest count returned being 947
grains. Strong evidence of the proximity of these samples to their kimberlitic
source was provided by the significant number of garnets that exhibit fresh,
angular, unabraded surfaces, and by the recovery for the first time of olivine
and enstatite, which are primary constituent minerals of kimberlite, and are
typically only found on or close to their source. Most of the samples in the
Mopipi Dam area also contained chrome diopside, a fragile kimberlitic
indicator mineral that is typically only found as rare grains within hundreds
of metres from its source.
Exploration activity produced strong evidence that the kimberlite sources
which the indicator minerals are derived from are diamondiferous, with four
diamonds being recovered from sampling during the year, all in the Mopipi Dam
area. Electron microprobe analysis of selected garnets recovered from sampling
identified 80 garnets as being diamond associated.
Drilling in the Mopipi Dam area will be carried out following the completion
of a gravity survey to properly define and delineate individual targets and to
provide precise locations for siting of drill holes. It is expected that the
gravity survey will commence in early 2002.
After the end of the year, a new anomalous indicator mineral trail was
identified to the east of Firestone's current prospecting licence areas, and
we subsequently applied for a new prospecting licence covering an area of
approximately 936 square kilometres. The prospecting licence for this new
area, known as Mopipi East, was recently granted and brings the total area
being explored by Firestone in the Mopipi region to approximately 3,000 square
kilometres. Soil sampling in the Mopipi East area is expected to commence in
early 2002.
South Africa
The Groen River Valley project is the Company's 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
those from the Orange River. However, due to the assignment of senior
exploration staff and equipment to exploration at Sandberg and Mopipi, work at
the Groen River Valley was limited during the year.
Ground mapping and aerial photo analysis were carried out to identify targets
for the next phase of drilling and sampling, which is now expected to start
once the evaluation of the Sandberg deposit has been completed.
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, this project has the potential to
make a significant contribution to the Company's future growth.
The Diamond Market
The most significant recent development in the diamond business was the
successful bid by a consortium comprising Anglo American, the Oppenheimer
family and Debswana to take De Beers private. This represented the largest
public to private transaction ever undertaken. Despite this significant
development, there have been no major changes in De Beers' corporate strategy
or direction, and De Beers is expected to continue to remain the dominant
figure in the diamond business for the foreseeable future.
The rough diamond market remained strong during the first half of the year,
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. Demand for gem
quality rough diamonds remained strong into early 2001, but subsequently
softened due to the slowdown in the US economy, with De Beers' sales for the
first half of 2001 dropping by 25% compared with the previous year. Although
prices for some categories of goods have softened as a result, with prices for
cheaper goods dropping up to 10%, overall rough diamond prices have been
supported as a result of De Beers restricting supplies to the market. Prices
for Avontuur goods have dropped between 5-10% over the past 6 months, although
continued shortages in larger size, better quality rough diamonds such as
those produced at Oena resulted in prices at this end of the market remaining
firm.
With the short term outlook for the US economy now appearing more positive,
rough diamond prices should firm up again in the coming year. The longer term
outlook continues to be positive, as current estimates by De Beers indicate
that the diamond market will experience a supply deficit within the next few
years, with prices expected to increase subsequently as a result.
Financial
Production for the year increased by 34% compared to last year as a result of
the Oena Mine coming into production. Operating profit showed little change,
primarily due to higher costs associated with development work at Oena and the
application of more conservative depreciation and amortisationrates.
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. With Oena expected to start making a
significant contribution to the Company's profits and cash flow in the coming
year, the Company's financial position remains strong. The Company remains
debt free.
In November 2001 the Company completed a share placing to raise approximately
#2.3 million. The primary purpose of the fund raising was to finance a more
aggressive exploration programme at Mopipi and to accelerate the evaluation
and development of the Sandberg deposit at the Oena Mine.
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
will also continue to restrict future investments to South Africa, Botswana,
Namibia 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 have done so with the granting of the Mopipi East
licence. We have also identified a number of new areas in South Africa with
good exploration potential, and have prospecting permit applications pending
for two new locations in proven diamondiferous areas in Namaqualand. We expect
these permits to be granted during the coming year.
We intend to continue to take advantage of the Company's extensive data and
expertise to identify low cost, attractive diamond mining and exploration
opportunities. The challenge we face with both current and new projects is how
best to exploit these opportunities without over-extending our human resources
and capital. We intend to address this issue by using earth-moving contractors
where possible, avoiding the need to make substantial new investments in
capital equipment, and by developing selected projects with joint venture
partners who will use their capital to finance the development of these
projects. This will allow Firestone's own capital to be focused on strategic
projects and our human resources to be directed towards what we do best -
finding new diamondiferous deposits.
We have made good progress during the year towards achieving our objective of
becoming a substantial independent diamond producer. With increasing
production from Oena, and the exceptional potential of Mopipi and our other
exploration projects, we remain confident about Firestone's prospects for
continued growth and development.
Finally, I would like to record the Board's appreciation of the dedication and
commitment of the Company's senior management and staff, all of whom
contributed to the Company's continued growth and development over the past
year.
James F. Kenny
Chairman
14 December 2001
FIRESTONE DIAMONDS PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 30 JUNE 2001
2001 2000
# #
Turnover 951,219 765,917
Change in stocks of finished goods
and in work in progress 35,978 (31,332)
Production 987,197 734,585
Other operating income 725 -
Raw materials and consumables (11,535) (55,368)
Staff costs (72,699) (88,578)
Depreciation and amortisation (149,163) (64,723)
Operating profit before administrative 754,525 525,916
costs
Other operating charges (371,428) (146,660)
Operating profit 383,097 379,256
Interest receivable and similar income 5,449 34,201
Interest payable and similar charges (1,001) (208)
Profit on ordinary activities before 387,545 413,249
taxation
Tax on profit on ordinary activities (111,247) (126,389)
Profit on ordinary activities after taxation 276,298 286,860
Minority interests (14,110) 1,121
Retained profit for the year 262,188 287,981
Earnings per share
Basic earnings per share 0.9 p 1.1p
Diluted earnings per share 0.9 p 1.1p
Turnover is wholly derived from continuing
activities.
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
FOR THE YEAR ENDED 30 JUNE 2001
# #
Profit for the financial year 262,188 287,981
Currency translation differences (44,605) (27,298)
Total recognised gains and losses for the year 217,583 260,683
FIRESTONE DIAMONDS PLC
CONSOLIDATED BALANCE SHEET
30 JUNE 2001
2001 2000
# # # #
FIXED ASSETS
Intangible assets 6,154,823 5,138,604
Tangible assets 1,601,671 1,604,661
Investments 176,386 105,876
7,932,880 6,849,141
CURRENT ASSETS
Stocks 69,478 45,953
Debtors 35,531 93,435
Cash at bank and in 417,741 1,009,529
hand
522,750 1,148,917
CREDITORS
Amounts falling due
within
one year (468,002) (335,552)
NET CURRENT ASSETS 54,748 813,365
TOTAL ASSETS LESS 7,987,628 7,662,506
CURRENT LIABILITIES
CREDITORS
Amounts falling due (9,674) (14,446)
after one year
PROVISIONS FOR
LIABILITIES
AND CHARGES
Other provisions (17,641) (9,731)
Deferred taxation (280,139) (189,848)
(297,780) (199,579)
NET ASSETS 7,680,174 7,448,481
CAPITAL AND RESERVES
Called up share capital 6,072,615 6,072,615
Share premium account 2,213,593 2,213,593
Other reserves (1,076,399) (1,076,399)
Profit and loss account 512,111 294,528
SHAREHOLDERS' FUNDS 7,721,920 7,504,337
Minority interests (41,746) (55,856)
7,680,174 7,448,481
Approved by the Board on 14 December, 2001
P Kenny
Director
FIRESTONE DIAMONDS PLC
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 30 JUNE 2001
2001 2000
# # # #
Net cash inflow from 764,442 952,043
operating activities
Returns on investments and
servicing of finance
Interest received 5,449 34,201
Interest element of finance (1,001) (208)
lease payments
Net cash inflow from returns
on
investments and servicing of 4,448 33,993
finance
Capital expenditure and
financial investment
Payments to acquire (982,931) (1,062,521)
intangible fixed assets
Payments to acquire tangible (322,409) (231,890)
fixed assets
Receipts from sales of 33,585 -
tangible fixed assets
Payments to acquire (70,510) (76,527)
investments
Net cash outflow from
capital expenditure
and financial investment (1,342,265) (1,370,938)
Acquisitions and disposals
Purchase of subsidiary - (641,936)
undertakings
Net cash acquired with - 20,166
subsidiaries
Payment of deferred
consideration
for subsidiary undertaking (3,425) -
Net cash outflow from (3,425) (621,770)
acquisitions and disposals
Net cash outflow before use
of
liquid resources and (576,800) (1,006,672)
financing
Management of liquid
resources
Cash withdrawn from 30 day - 313,319
deposit
Financing
Issue of ordinary share - 1,469,476
capital
Exercise of warrants - 119,249
Capital element of finance (4,126) -
lease payments
(4,126) 1,588,725
(Decrease)/increase in cash (580,926) 895,372
Notes to the preliminary statement of results for the year ended 30 June 2001
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 2001 annual report
and financial statements.
2. Earnings per share
Basic earnings per share is based on a profit of #262,188 (2000: #287,981) and
a weighted average number of shares in issue of 30,363,078 (2000: 25,970,122).
Diluted earnings per share is based on a profit of #262,188 (2000: #287,981).
The weighted number of shares used to calculate diluted earnings per share
incorporates the weighted average number of shares in issue of 30,363,078
(2000: 25,970,122) plus dilutive potential ordinary shares arising from share
options of 41,315 (2000: 22,835), totaling 30,404,393 (2000: 25,992,957).
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 2001 statutory financial statements,
which were approved by the Board on 14 December 2001. 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 4th Floor, Aldermary
House, 10-15 Queen Street, London EC4N ITX on 31 January, 2002 at 12.00 a.m.
5. Dividends
The directors are not declaring a dividend for the period.
For further information:
Philip Kenny, Firestone Diamonds 020 7370 6452 / 07831 324 645
Laurence Read, Weber Shandwick Square Mile 020 7950 2880 / 0797 995 5923
Jamie Cumming, Bell Lawrie White 0141 314 8103 / 0776 8044 620
Website: www.firestonediamonds.com
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