RNS Number:7055T
Firestone Diamonds PLC
27 March 2002
Firestone Diamonds plc
Unaudited interim results for the six months to 31 December, 2001
HIGHLIGHTS
• The company remains debt free with cash reserves of £1.8 million
• £2.2 million raised in November 2001 through an institutional placing
• Rough diamond market recovered strongly in 2002 from US economic
downturn
Oena Mine, South Africa
• 11% increase in value of production to $801 per carat ($723 per carat:
December 2001)
• Parcel of 208 carats sold in March for an average price of $1,080 per
carat, an increase of 49% on the last average sale price
• High-grade Sandberg deposit to come into production by June
Mopipi, Botswana
• Exceptional results from sampling indicate the likely presence of
diamondiferous kimberlite
• Geophysical surveys under way, to be followed by drilling
• New license granted covering approx. 936 square km
Avontuur Mine, South Africa
• Excavation of new SP3 deposit under way
Groen River Valley, South Africa
• Drilling expected to resume in Q3 2002
Firestone continued its progress towards its objective of becoming a leading,
independent African diamond producer, with a number of significant developments
at the Company's mining operations and exploration projects. With increasing
production from the Oena Mine, and the exceptional potential of Mopipi and
Sandberg, we remain confident about Firestone's prospects for further growth and
development.
The main focus of mining operations during the period was at Oena, where ramp-up
to full scale production commenced and a total of 338 carats were recovered at
an average size of 1.84 carats per stone. Prices for Oena production continued
to improve, with the average value of production to date increasing 11% to $801
per carat. Preparations are under way for the development of the high-grade
Sandberg deposit, which is expected to make a significant contribution to
revenues when it comes into production in June.
Exploration continued at Mopipi, where follow-up sampling produced exceptional
results that provide further strong evidence of the presence of diamondiferous
kimberlite in the Mopipi Dam area. Geophysical surveys are being carried out in
the Mopipi Dam area to delineate drilling targets. These surveys will be
completed in April and once the data have been interpreted and integrated with
other exploration results, drilling will commence.
Total production was maintained at a similar level to the same period last year,
although turnover was lower as a result of the Company's decision to postpone
sales in the last quarter of 2001 until market conditions improved, which they
did in January. The Company continues to be profitable, with cash flow from
mining operations financing all South African operating costs and exploration
expenditure during the period.
In order to accelerate the evaluation and development of the Sandberg deposit
and to finance a more aggressive exploration programme at Mopipi, the Company
completed a share placing to UK institutions in November 2001, which raised
approximately £2.2 million net of expenses. The Company remains debt free and
has cash reserves of approximately £1.8 million.
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 have been carried out and a
resource of more than 40 million tonnes of diamondiferous gravels has been
identified, containing an estimated resource of 270,000 carats. With an
estimated diamond value of $880 per carat, the in situ value of the deposits is
approximately $240 million.
Following the completion of modifications to the main processing plant, ramp-up
to full scale production commenced during the period, and a total of 338 carats
was recovered at an average size of 1.84 carats per stone. Grades from mining
areas were in line with expectations, ranging from 0.43 to 1.34 carats/100
tonnes.
Prices for Oena production have remained strong with the most recent sale of a
parcel of 208 carats producing an average price of $1,080 per carat. Included
in this parcel was a fancy yellow diamond weighing 30.14 carats that sold for
$104,200, or $3,460 per carat, and a 12.57 carat diamond that sold for $30,180,
or $2,400 per carat. This brings the overall average value of production from
Oena up to $801 per carat, an increase of 11% compared to the previous value of
$723 per carat reported in December. As production volumes continue to
increase, we remain confident that run of mine production will reach our
projected value of $880 per carat.
A very significant potentially high-grade deposit was discovered at Sandberg in
2001 and is estimated to contain more than 1 million tonnes of diamondiferous
Proto gravels. Proto gravel deposits of this type on the lower Orange River
have produced average grades up to 5 carats/100 tonnes, with flash grades
reported of up to 70 carats/100 tonnes. On this basis, the Sandberg deposit is
expected to contain up to 70,000 carats, with a gross value of approximately $60
million, at an average price of $880 per carat.
Planning for the development of Sandberg started at the end of 2001. Due to the
substantial depth of overburden at Sandberg, it was decided that contractors be
used in order to bring the deposit into production as soon as possible. A
contract was awarded to Bradis Contract Mining in February 2002 and overburden
stripping commenced in March, with the first gravel expected to be processed by
June.
In order to handle the additional material that will be mined at Sandberg, a
mobile gravel treatment plant was acquired in early 2002 and is in the process
of being commissioned with a view to being operational by June.
Work has also commenced on the development of a second Field Screening Unit,
which will be located at Sandberg. This will allow oversize material to be
removed close to the mining excavations and will reduce earthmoving requirements
by approximately 60% per ton of gravel mined.
Approximately 630 metres of reverse circulation and percussion drilling was
carried out at Oena during the period, principally at the Sandberg deposit.
This drilling has shown that the deposit extends further to the east and remains
open on that side. Additional drilling is planned to fully delineate the
deposit which may result in the estimated resource increasing. Similar high
grade deposits to Sandberg are believed to occur elsewhere at Oena, and drilling
will be carried out with the objective of identifying and evaluating this
potential once drilling at Sandberg has been completed.
Mopipi
The Mopipi joint venture project covers approximately 3,000 square kilometres
and is located about 50 kilometres west of De Beers' major Orapa Mine in
Botswana. Mopipi was the primary focus of the Company's diamond exploration
efforts during the period, and exploration results continued to produce very
strong evidence of the presence of diamondiferous kimberlite in the Mopipi 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 could be of substantial commercial
significance.
During the period, several hundred follow-up samples were taken from more than
sixty targets that had been identified by sampling, photo feature analysis and
ground geological mapping. Most of these targets are located in the Mopipi
Central and Mopipi South licence areas and coincide with the intersection of a
deep-seated north-south structural trend with east-west trending dykes and
fractures. Kimberlite intrusions typically exploit such intersections.
An intense concentration of samples with exceptionally high counts of
kimberlitic indicator minerals was identified in the Mopipi Dam area, with 11
samples containing more than 200 grains of kimberlitic garnet, the highest count
returned being 947 grains. Strong evidence of the proximity of these samples to
their kimberlitic source is provided by the significant number of garnets that
exhibit fresh, unabraded surfaces, and by the recovery of a significant number
of grains of chrome diopside and other fragile kimberlitic indicator minerals
that are typically only found at or close to their source.
Electron microprobe analysis of selected garnets recovered from sampling
identified 36 pyropes as G10 garnets, and 44 eclogitic garnets as coming from
the Diamond Inclusion (DI) field. The presence of G10 garnets and DI eclogitic
garnets, combined with the recovery of 6 diamonds from earlier sampling in the
area provides strong evidence of a local diamondiferous kimberlite source in the
Mopipi Dam area.
On completion of the sampling programme a decision was made in November to
conduct geophysical surveys in the Mopipi Dam area to properly define and
delineate targets and to provide precise locations for the siting of drill
holes. Extensive work has been done since then on the acquisition and
interpretation of geophysical data. Data from gravity and magnetic surveys have
been correlated with sampling and mapping work, and a number of well defined
geophysical anomalies have already been identified which coincide with targets
identified by sampling and mapping in the area. The top geophysical targets
identified to date coincide with some of the best targets identified by analysis
of sampling results, in terms of both garnet and chrome diopside counts and in
terms of diamond-associated geochemistry. On that basis, these have been ranked
as top priority drill targets.
The final stage of the geophysical programme is approaching completion. A high
resolution helicopter-borne magnetic survey is being conducted over the Mopipi
Dam area using the 'Midas' system, which is the most advanced system of its type
in the world and which has some significant advantages over ground surveys in
relation to sampling frequency, accuracy and resolution. It is expected that
this survey will identify additional targets that have not been detected by the
other geophysical surveys. The Midas survey will be completed in April, and
once the data from the survey have been interpreted and integrated with the rest
of the geophysical data, target selection will be finalised and drilling will
commence.
During the period, a new anomalous indicator mineral trail was identified to the
east of Firestone's current prospecting licence areas. As a result the Company
applied for and was granted a new prospecting licence over this area totaling
some 936 square kilometres. Satellite and aerial photo interpretation work has
started on the new area, known as Mopipi East, to identify target areas for soil
sampling.
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.
The most significant development in 2001 was the discovery of the SP3 deposit.
Drilling results indicate a large resource of gravel and a potential grade
substantially higher than that of current mining areas. Planning began during
the period to excavate and test the SP3 deposit and, if results confirm its
potential, to bring it into production. In preparation for gravel from SP3 to
be excavated and processed, mining activities during the period were focused on
clearing and processing stockpiles of lower grade gravels. As a result,
production at the Avontuur Mine was limited. A total of 1,974 carats was
recovered during the period, with grades from the main areas mined during the
period ranging from 8 to 47 carats/100 tonnes.
Excavation commenced on the SP3 deposit in February and it is expected that the
first gravel will be available for processing in April.
Diamonds produced continued to be approximately 85% gem quality, with an average
size of 0.22 carats per stone. Average prices for gem quality production sold
during the period fell from $109 to $100 per carat as a result of poor
conditions in the diamond business that were caused by the negative economic
climate in the United States. The market has strengthened considerably in 2002
and prices achieved for gem quality production from Avontuur have increased to
$110 per carat.
Commissioning of the new Dense Media Separation (DMS) plant that was acquired
last year is now under way.
Exploration activity continued at Avontuur and a total of 2,294 metres of
percussion drilling was carried out over 144 holes. The primary exploration
objective for drilling at Avontuur at present is to identify other deposits
similar to the SP3 deposit.
The Company is expecting prospecting permits for new areas that have been
applied for in the Hondeklip Bay area to be granted in the next few months,
following which exploration on those areas will begin.
Groen River Valley
The Groen River Valley project covers an area of approximately 74,000 acres of
the lower reaches of the Groen River in Namaqualand. Firestone has carried out
a considerable amount of prospecting in this region in recent years, resulting
in the identification of the palaeo river channels which were responsible for
transporting the diamonds of large size and exceptional quality that have been
mined near the mouth of the Groen River by De Beers and other operators.
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.
Ground mapping and aerial photo analysis continued during the period to identify
targets for the next phase of drilling and sampling. This work is expected to
start in the next few months once the evaluation of the Sandberg deposit at Oena
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 area, this project has
the potential to make a significant contribution to the Company's future growth.
James F. Kenny
Chairman
27th March, 2002
Firestone Diamonds plc
Unaudited Consolidated Profit and Loss Statement
For the six months to 31 December, 2001
6 months to 31 6 months to 31 12 months to 30
December, 2001 December, 2000 June, 2001
£ £ £
Unaudited Unaudited Audited
Production 445,694 460,891 987,197
Turnover 209,605 443,466 951,219
Change in stocks of finished goods 236,089 17,425 35,978
And in work in progress
Other operating income 4,760 (22,815) 725
Raw materials and consumables (54,462) (168) (11,535)
Staff costs (62,559) (49,372) (72,699)
Depreciation and amortisation (39,601) (51,645) (149,163)
Operating profit before administrative costs 293,832 336,891 754,525
Other operating charges (49,246) (71,271) (371,428)
Operating profit 244,586 265,620 383,097
Interest receivable and similar income 3,799 6,700 5,449
Interest payable and similar charges (1,265) (670) (1,001)
Profit on ordinary activities before taxation 247,120 271,650 387,545
Deferred tax on profit on ordinary activities (87,701) (19,858) (111,247)
Profit on ordinary activities after taxation 159,419 251,792 276,298
Minority interests (19,373) (2,838) (14,110)
Retained profit for the period 140,046 248,954 262,188
Earnings per share
Basic profit per share 0.5 p 0.8 p 0.9 p
Diluted profit per share 0.4 p 0.8 p 0.9 p
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 2001
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, 2001, 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 31,377,002.
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.
This information is provided by RNS
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