RNS Number : 8334J
Firestone Diamonds PLC
10 December 2008
Firestone Diamonds plc
Preliminary announcement of results for the year ended 30 June, 2008
LONDON: 10 December, 2008
The Board of Firestone Diamonds plc, ("Firestone" or "the Company"), the AIM-quoted diamond mining and exploration company (ticker:
AIM:FDI), announces preliminary audited results for the year ended 30 June, 2008.
HIGHLIGHTS
Financial
* Turnover increased 102% to �3.3m (2007: �1.6m)
* Loss of �0.2m (2007: Loss of �0.5m); diluted loss per share 0.4p (2007:
Loss 1p)
* Gain of �2.8 million on disposal of interest in African Diamonds plc
* Bonte Koe toll treatment project with De Beers reached full production and
positive cash flow
* �5 million financing completed in July 2008
BK11, Botswana
* Positive results from Phase 1 bulk sampling
- sample grade of 10 cpht and modelled grade of 15 cpht
- diamond value estimated at $200/carat in June 2008
* Phase 2 bulk sampling under way
- first hole returned sample grade of 10 cpht
- full results expected in early 2009
* Inferred resource statement expected Q1 2009
* Possible production in 2010
BK16, Botswana
* Agreement to acquire 87.5% interest in BK16
* Good economic potential
- historical sampling recovered grades up to 15 cpht and high quality
diamonds
* Drilling commenced in November 2008
Tsabong, Botswana
* Over 10,000 metres of percussion, core and LDD drilling completed
* Independent data review concluded that Tsabong has the potential for
economic large sized kimberlite deposits
* LDD drilling completed on MK1 during the year and on five more kimberlites
since year end
* Bulk sampling results expected in early 2009
Outlook
* Company well funded and confident about prospects despite challenging
market conditions
* Increased focus on cash and cash flow
* New toll treatment projects being pursued
* BK11 and BK16 will be primary focus in Botswana
* Considering joint venture partner for Tsabong
Speaking today, Philip Kenny, CEO of Firestone Diamonds, said "We have made good progress in Botswana and South Africa over the past
year. Bulk sampling results from BK11 have been very promising and we continue to believe that the prospects for identifying economic
kimberlites at Tsabong are good. Revenues at Bonte Koe in South Africa increased by over 100% during the year, and we are pursuing a number
of similar new toll treatment projects."
For further information, visit the Company's web site at www.firestonediamonds.com, or contact:
Philip Kenny, Firestone Diamonds +44 20 8834 1028/+44 7831 324 645
Gareth Tredway, Jos Simson, Conduit PR +44 20 7429 6603/+44 7899 870 450
Mike Jones/Ryan Gaffney, Canaccord Adams +44 020 7050 6500
(Joint Broker)
Jerry Keen, Blue Oar (Joint Broker) +44 20 7448 4492/+44 777 069 7358
Alexander Dewar, Brewin Dolphin +44 131 529 0276
(Nominated Adviser)
Dear Shareholder,
The past year has seen continued good progress in the growth and development of Firestone's project portfolio. Activities during the
year were primarily focused on Botswana, which is the world's largest and lowest cost producer of diamonds. Firestone is the largest holder
of diamond exploration rights in Botswana's kimberlite fields, with approximately 25,000 square kilometres now under license, and has 95
known kimberlites within its licence areas.
Overview
The most significant developments during the year were at the BK11 evaluation project in Botswana, where we made good progress towards
confirming its economic potential. We also acquired rights to the nearby BK16 kimberlite, which we believe has similar potential to BK11.
We commenced a significant bulk sampling programme at Tsabong, where we believe that the prospects for identifying economic kimberlites are
very good. Activities in South Africa were focused on the Company's toll treatment joint venture with De Beers at the Bonte Koe Mine in
Namaqualand. The operation reached its full design capacity and achieved target revenue of �3.3 million for the year.
With appetite for risk greatly reduced in current market conditions and investors primarily concerned about cash and cash flow, we are
focusing most of our activities on BK11 and BK16, which are at a more advanced stage of evaluation. In relation to BK11, we believe that,
subject to the results of the next phase of evaluation, it could be brought into production as early as mid 2010. We are also continuing to
pursue new toll treatment projects, which are increasingly attractive in the current economic environment as a source of consistent and
predictable revenue and cash flow.
While we believe that Tsabong has very substantial economic potential, it is at an earlier stage than our Orapa projects and will need
significant investment to confirm economic viability. We have therefore decided to reduce expenditure on Tsabong and are considering the
introduction of a joint venture partner to finance further work. Despite current market conditions, interest in the project remains high and
a number of expressions of interest have already been received.
The crises that have damaged the world's financial markets and the global economy are without precedent and have had a very significant
impact on the mining sector. Share prices of most companies in the sector, both large and small, including Firestone, have experienced
substantial declines as a result. While many of these companies may not survive or remain independent due to depressed commodity prices and
limited availability of debt and equity finance, we remain confident about Firestone's prospects. The Company's cash position remains
secure, we have a very experienced and capable management team, a highly prospective portfolio of projects and a clear vision of how to
continue successfully developing our company in these challenging times.
Financial
Turnover for the period increased 102% to �3.3 million compared to last year, principally as a result of Bonte Koe reaching full
production capacity during the year. The Company produced an operating profit of �2.1 million before impairment charges of �2.2 million
related to its South African alluvial assets. During the year the Company disposed of its interests in African Diamonds plc, which resulted
in a net gain of �2.8 million. Loss per share was 0.4 pence (2007: 1 pence loss per share). In July 2008 the Company raised �5 million from
a share placement to finance exploration and evaluation expenditures in Botswana. The Company's current cash position is approximately �2.5
million.
Diamond market
Substantial decreases in prices for rough diamonds have been reported over the past 2 months. These decreases have not been reflected in
prices for polished diamonds, which have only declined by about 10% in 2008. We believe that much of the rough price decreases can be
attributed to significant reductions in availability of bank financing to rough diamond buyers for inventory and receivables. We continue to
believe that the long term prospects for diamonds remain positive due to the projected significant long term shortfall in supply and that
diamond prices will increase once again when the global economy begins to recover.
BK11, Botswana
Substantial progress was made at the BK11 kimberlite in the Orapa area during the year. The Phase 1 evaluation programme was completed
in June 2008, with very encouraging results. A sample of 135 tonnes of material produced a sample grade of 10 carats per hundred tonnes
("cpht") and a modelled grade of 15 cpht. The quality of diamonds recovered was very good, comprising mostly clear white gemstones and the
value was estimated at approximately $200 per carat in June 2008. With low operating costs in the Orapa area of $7-8 per tonne, the economic
potential of BK11 looks very promising.
In July 2008, the Company commenced its Phase 2 evaluation programme, comprising approximately 2,300 metres of percussion, core and 36
inch large diameter drilling ("LDD"). Drilling was completed in November 2008 and approximately 1,200 tonnes of kimberlite material from six
LDD holes was transported to the Company's bulk sample plant at Tsabong.
In order to improve final diamond recovery from the bulk sampling plant, a modular second stage diamond recovery plant based around
automated grease belt technology has been leased. Commissioning of the grease plant was completed in November 2008 and has delayed
processing of the LDD samples by six weeks. Results from the first hole have been analysed, and returned a sample grade of 10 cpht from
approximately 120 tonnes processed, which is in line with the sample grade from the first three LDD holes drilled in Phase 1.
With annual shutdown starting in mid December, processing of material from the five remaining LDD holes will resume in January 2009.
External audits of Phase 2 bulk sampling will be carried out, following which an independent valuation of diamonds recovered will be
undertaken. The Company expects that this will provide sufficient data to define an inferred resource. Subject to the results of this work,
the Company is evaluating the feasibility of accelerating a development decision on BK11 to allow first production from BK11 to commence in
2010.
BK16, Botswana
In June 2008, the Company entered into an agreement under which it can earn an 87.5% interest in the BK16 kimberlite, which is located
20 kilometres from BK11. The Company believes that BK16 has similar economic potential to BK11. BK16 was discovered by De Beers in the
1970's and a grade of 15 cpht was reported from bulk sampling. Diamonds recovered by the limited historical sampling carried out were
predominantly high quality, white gemstones, which indicates that they are likely to have a high average value, possibly similar to BK11.
The Company plans to carry out a programme of core and LDD drilling similar to that undertaken on BK11. Core drilling commenced on BK16 in
November 2008.
Tsabong, Botswana
Tsabong is the Company's biggest kimberlite exploration and evaluation project. It contains 85 known kimberlites, including the 180
hectare MK1 kimberlite which is one of the world's largest known diamondiferous kimberlites.
Substantial work was carried out on Tsabong during the year, with over 10,000 metres of percussion, core and LDD drilling completed. An
independent review of data from the project was completed and confirmed that the Tsabong field is located in a similar geological setting to
the major Jwaneng Mine and that it has the potential to contain economic large sized diamondiferous kimberlite deposits. Evaluation work was
focused on 14 high priority kimberlites that had been selected based on diamond content, kimberlite indicator mineral chemistry and size.
LDD drilling was carried out on MK1 and macrodiamonds were recovered during the year, but processing of the samples was not completed as a
result of metallurgical problems encountered with MK1 material at the bulk sampling plant.
Since the end of the year modifications have been made to the bulk sampling plant and LDD drilling has been completed on a further 5
kimberlites. All LDD samples have been processed through the bulk sampling plant and are now being processed through the newly commissioned
grease recovery plant as a final audit. Results are expected in early 2009.
South Africa
Activities in South Africa were focused on the Company's toll treatment joint venture with De Beers at the Bonte Koe Mine in Namaqualand.
The operation had a very successful year, achieving full design capacity of one million tonnes per annum and positive cash flow in the first
half of the year. With the Company's strategic focus increasingly directed towards Botswana, the Company announced during the year that the
Company's other alluvial assets in South Africa would be sold or joint ventured. A number of discussions have been held with interested
parties, but no agreements have been concluded yet.
Jwaneng, Botswana
Following the completion by De Beers of their initial exploration programme over Firestone's prospecting licences in the Jwaneng region,
De Beers and Firestone have agreed to terminate the Jwaneng joint venture. The Company is currently evaluating alternatives for the
project.
James F Kenny
Chairman
9 December 2008
FIRESTONE DIAMONDS PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 30 JUNE 2008
2008 2007
� �
Revenue 3,309,412 1,633,393
Changes in inventories (110,032) 85,109
Raw materials and consumables used (603,292) (274,143)
Employee costs (1,198,505) (319,990)
Amortisation and depreciation (972,510) (531,887)
Impairment of mineral rights (2,166,529) -
Other operating expenses (1,328,399) (922,184)
Gain on sale of investments 3,030,135 -
Loss on disposal of derivative financial instruments (64,516) (668,683)
Operating loss (104,236) (998,385)
Financial income 134,530 280,834
Finance expense (326,318) (134,335)
Loss before tax (296,024) (851,886)
Taxation 58,912 308,979
Loss after tax for the year attributable to equity (237,112) (542,907)
shareholders
Basic loss per share (0.4)p (1.0p)
Diluted loss per share (0.4)p (1.0p)
FIRESTONE DIAMONDS PLC
CONSOLIDATED BALANCE SHEET
30 JUNE 2008
2008 2007
Assets � �
Non-current assets
Goodwill 2,057,802 2,057,802
Intangible mining assets 10,832,026 9,589,925
Property, plant and equipment 12,007,707 12,568,132
Deferred tax asset 247,545 174,726
25,145,080 24,390,585
Current assets
Inventories 311,592 275,508
Trade and other receivables 1,345,301 2,335,709
Available-for-sale investments - 5,537,915
Cash and cash equivalents 381,507 1,118,790
2,038,400 9,267,922
Total assets 27,183,480 33,658,507
Equity and liabilities
Capital and reserves attributable to equity holders
of the parent
Share capital 11,169,969 11,158,290
Share premium 19,278,205 19,181,560
Merger reserve (1,076,399) (1,076,399)
Fair-value reserve - 2,947,164
Translation reserve (5,021,312) (2,134,437)
Retained deficit (2,256,421) (2,583,363)
Total equity 22,094,042 27,492,815
Non-current liabilities
Interest-bearing loans and borrowings 1,860,593 2,163,178
Deferred tax 36,714 294,161
Provisions 199,827 1,045,469
2,097,134 3,502,808
Current liabilities
Interest-bearing loans and borrowings 775,030 635,886
Trade and other payables 1,642,484 1,358,683
Current tax liabilities 9,376 6,382
Other financial liabilities - 661,933
Provisions 565,414 -
2,992,304 2,662,884
Total equity and liabilities 27,183,480 33,658,507
FIRESTONE DIAMONDS PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2008
Share Share Merger Fair-value reserve Translation reserve Retained Total
Capital Premium Reserve � � Deficit Equity
� � � � �
At 1 July 2006 11,151,581 19,132,921 (1,076,399) 4,568,841 - (1,940,168) 31,836,776
Loss for the year recognised - - - - - (542,907) (542,907)
in income and expense
Deferred tax on net investment - - - - - (308,755) (308,755)
in subsidiary
Translation of foreign - - - - (2,134,437) - (2,134,437)
subsidiaries
Change in value of - - - (1,621,677) - - (1,621,677)
available-for-sale investments
Share-based payment adjustment - - - - - 208,467 208,467
Total gains and losses - - - (1,621,677) (2,134,437) 208,467 (3,547,647)
recognised in equity
Total recognised gains and - - - (1,621,677) (2,134,437) (643,195) (4,399,309)
losses
Shares issued in year 6,709 48,639 - - - - 55,348
At 30 June 2007 11,158,290 19,181,560 (1,076,399) 2,947,164 (2,134,437) (2,583,363) 27,492,815
At 1 July 2007 11,158,290 19,181,560 (1,076,399) 2,947,164 (2,134,437) (2,583,363) 27,492,815
Loss for the year recognised - - - - - (237,112) (237,113)
in income and expense
Deferred tax on net investment - - - - - 271,354 271,355
in subsidiary
Translation of foreign - - - - (2,886,875) - (2,886,875)
subsidiaries
Sale of available-for-sale - - - (2,947,164) - - (2,947,164)
investments
Share-based payment adjustment - - - - 292,700 292,700
Total gains and losses - - - (2,947,164) (2,886,875) 292,700 (5,541,399)
recognised in equity
Total recognised gains and - - - (2,947,164) (2,886,875) 326,942 (5,507,097)
losses
Shares issued in year 11,679 96,645 - - - - 108,324
At 30 June 2008 11,169,969 19,278,205 (1,076,399) - (5,021,312) (2,256,421) 22,094,042
FIRESTONE DIAMONDS PLC
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 30 JUNE 2008
2008 2007
� �
Cash flow from operating activities
Loss before taxation (296,024) (851,886)
Adjustments for:
Depreciation, amortisation and impairment 3,139,039 531,887
Effect of foreign exchange movements (283,933) (844,433)
Interest payable 326,318 134,335
Equity-settled share-based payment 292,700 208,467
Fair-value adjustment in value of investments - 781,778
Loss on sale of derivative financial instruments 64,516 -
Profit on sale of investment in shares (3,030,135) (6,593)
Loss/(profit) on sale of property, plant and 16,767 (22,664)
equipment
Net cash flow from operating activities before 229,248 (69,109)
changes in working capital
Increase in inventories (36,084) (210,938)
Decrease/(increase) in trade and other receivables 917,589 (623,646)
Increase in trade and other payables 359,613 796,604
Decrease in provisions (280,229) (242,153)
Net cash flow generated from/(used in) operating 1,190,137 (349,242)
activities
Investing activities
Payments for property, plant and equipment (1,506,179) (2,893,420)
Payments for non-current intangible assets (4,083,930) (1,513,950)
Costs capitalised within non-current intangible (954,598) (1,067,074)
assets
Payments to settle liability arising on derivative (726,449) -
financial instruments
Proceeds from sale of investment in shares 5,620,886 270,335
Proceeds from sale of property, plant and equipment - 94,696
Net cash flow from investing activities (1,650,270) (5,109,413)
Financing activities
Issue of ordinary shares 108,324 55,348
Proceeds from long-term borrowings 238,144 2,132,115
Proceeds from lease finance arrangements 48,324 -
Repayment of long-term borrowings (336,878) (219,342)
Repayment of lease finance (8,746) (6,847)
Interest paid (326,318) (134,335)
Net cash flow (used in)/ from financing activities (277,150) 1,826,939
Net decrease in cash and cash equivalents in the (737,283) (3,631,716)
year
Cash and cash equivalents at the beginning of the 1,118,790 4,750,506
year
Cash and cash equivalents at the end of the year 381,507 1,118,790
Notes
1. Basis of preparation
The consolidated financial statements of Firestone Diamonds plc have been prepared in accordance with International Financial Reporting
Standards (IFRSs), International Accounting Standards (IAS) and International Financial Reporting Interpretations Committee (IFRIC)
interpretations (collectively "IFRSs") as adopted for use in the European Union and as issued by the International Accounting Standards
Board and with those parts of the Companies Act 1985 applicable to companies reporting under IFRS. These consolidated financial statements
are the first Firestone Diamonds plc financial statements to be prepared in accordance with IFRS, the transition date being 1 July 2006.
2. First-time adoption
In preparing these financial statements, the Group has elected to apply the following transitional arrangements permitted by IFRS1
'First-time Adoption of International Financial Reporting Standards.
* Business combinations effected before 1 July 2006, including those that
were accounted for using the merger method of accounting under UK
accounting standards, have not been restated.
* Only those exchange differences arising on the retranslation of foreign
operations since 1 July 2006 have been recognised as a separate component
of equity, with the related reserve being set to zero at that date.
* IFRS2 'Share-based payments' has been applied to employee options granted
after 7 November 2002 that had not vested by 1 July 2006.
The Group has made estimates under IFRSs at the date of transition, which are consistent with those estimates made for the same date
under UK GAAP unless there is objective evidence that those estimates were in error, i.e the Group has not reflected any new information in
its opening IFRS balance sheet but reflected that new information in its income statement for subsequent periods.
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 income statement, balance sheet, statement of changes in equity and cash flow statement and associated notes have been
extracted from the Company's 2008 statutory financial statements, which were approved by the Board on 9 December 2009. The auditors have
reported on these financial statements; 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. Earnings/(loss) per share
The calculation of the basic earnings per share is based upon the net profit after tax attributable to ordinary shareholders of �34,242
(2007: loss of �851,662) and a weighted average number of shares in issue for the year of 55,793,360 (2007: 55,758,177). The diluted loss
per share in 2008 is based upon the net profit attributable to ordinary shareholders of �34,242 and a weighted average number of shares in
issue for the year of 60,207,821. The diluted loss per share in 2007 is the same as the basic loss per share in 2007 as the loss has an
anti-dilutive effect.
5. Annual General Meeting
The company's Annual General Meeting will be held at MWB Business Exchange, 60 Cannon Street, London EC4N 6NP on 29 January, 2009 at
11.45 a.m.
6. Dividends
The directors do not recommend the payment of a dividend for the period.
7. 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
FR GGMGZNLZGRZM
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