RNS Number:1338F
Firestone Diamonds PLC
16 December 2002
Firestone Diamonds plc
Preliminary statement of results
for the year ended 30 June, 2002
LONDON: 16 December, 2002 - 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, 2002.
HIGHLIGHTS
Oena Mine, South Africa
* 230% increase in production to 923 carats
* 18% increase in average value of production to $855 per carat
* Capacity expansions to give further increases in production
Avontuur Mine, South Africa
* Production limited due to gravel processing problems
* 8% increase in value of gem quality production to $108 per carat
* New dense media separation plant being commissioned
Mopipi, Botswana
* Geophysical surveys completed
* Drilling programme provides evidence of a new kimberlite source in the
Mopipi region
* Exploration acreage increased 50% to 3,000 square kilometres
Groen River Valley, South Africa
* New exploration areas identified and prospecting permits applied for;
exploration acreage to double
Financial
* Group production declined 10%, but expected to recover strongly during
current year
* Third consecutive year of operating profit
* Share placement in November 2001 raised #2.2 million
* The company remains debt free, with cash and diamond stocks of
approximately #1.1 million
* Rough diamond market recovered strongly in 2002, and is expected to
strengthen further
New projects
* New mining project and two new exploration projects in Namaqualand
expected in the current year
* Black economic empowerment joint venture planned for South Africa
The past year saw continued progress in the development of Firestone's mining
operations and exploration projects. The primary focus at our mining operations
was on development work at both the Avontuur and Oena Mines, while exploration
activity during the year was mainly concentrated on the Mopipi project in
Botswana. The Company has been very active in identifying new projects, and we
expect to secure and commence work on our third mining operation and two new
exploration projects in the coming year. While the South African government's
initiatives to support black economic empowerment (BEE) have received much
publicity in recent months, they are unlikely to have an adverse effect on
Firestone. These initiatives are expected to result in new opportunities
opening up, and Firestone intends to pursue these opportunities in cooperation
with a prominent BEE partner, with whom negotiations are at an advanced stage.
Mining
Oena Mine, Namaqualand, South Africa
Significant progress was made at Oena during the year, with production
increasing 230% to 923 carats, at an average size of 1.93 carats per stone.
Prices for Oena production continued to remain strong, with the average value of
production increasing 18% to $855 per carat. A number of special stones were
recovered during the year, including a fancy yellow diamond weighing 30.14
carats that sold for $104,200, or $3,460 per carat, and white diamonds of 26.28,
13.5 and 11.27 carats that sold for $2,096, $3,998 and $2,273 per carat,
respectively. Diamonds larger than 5 carats accounted for more than 47% of
production. Since the year-end a very rare orange diamond weighing 16.41 carats
was recovered. This stone has not yet been sold. With worldwide rough diamond
prices averaging approximately $60 per carat, the prices achieved for Oena
production place it in the top echelon of diamond mines worldwide in terms of
diamond value. We remain confident that the value of run of mine production
will continue to rise as production volumes increase and as a consequence of the
continued shortage of large, high quality diamonds.
A number of significant additions were made to the mining infrastructure at Oena
during the year. A new mobile gravel treatment plant was acquired and
commissioned by year-end. A second field screening unit was also acquired and
put into operation to supply the new plant with screened gravel. Grades from
mining areas were broadly in line with expectations, ranging from 0.39 to 1.49
carats/100 tonnes.
Development of the Sandberg deposit began in March with the awarding of a
contract for overburden stripping. This work took much longer than anticipated
as a number of extremely hard cemented sandstone layers were encountered in the
overburden. Strong water flows were also encountered at depth in the mining
pit, and continuous pumping was required to allow excavation to proceed. Gravel
has been recovered from the target levels, and initial recoveries have produced
an average size of 3.26 carats per stone. However, a number of problems have
been encountered in processing the target gravels due to the fact that they are
water-saturated and have a high clay content. This will require changes to be
made to the gravel screening unit and treatment plant, and further processing of
these gravels has therefore been deferred while the necessary modifications are
reviewed.
Pending these modifications, the new gravel treatment plant has been relocated
upstream from Sandberg to the Blokwerf terrace, where development work has
recently commenced. Blokwerf hosts more than 50% of the gravel resources at
Oena. Initial recoveries indicate a higher grade and larger average size at
Blokwerf than was recovered from mining on the meso gravels downstream at the
Oena terrace. It is expected that meso gravel mining operations will now be
carried out simultaneously at both the Oena and Blokwerf terraces.
The increase in earthmoving and gravel processing capacity that was put in place
at Oena during the year is expected to have a significant impact on production
during the current year.
Exploration activity continued at Oena and a total of 946 metres of percussion
drilling was carried out over 55 holes at the Sandberg, Oena and Blokwerf
deposits.
Avontuur Mine, Namaqualand, South Africa
Production at Avontuur during the second half of the year was slightly higher
than the first half, at 1,685 carats, for full year production of 3,350 carats.
Diamonds produced continued to be approximately 85% gem quality, with an average
size of 0.21 carats per stone. Average prices for gem quality production
increased 8% to $108 per carat, with prices rising to $114 per carat in May due
to strong market demand. Grades from mining areas ranged from 6 to 47 carats/
100 tonnes.
The lower production during the year was primarily due to the fact that mining
activities were focused on clearing and processing stockpiles of lower grade
gravels in preparation for the development of the SP3 deposit. The first
gravels from SP3 were excavated and available for processing towards the end of
the year. An unexpectedly high clay content in the gravel hampered processing
of this material, resulting in oversize material having to be processed several
times to maximise liberation of diamonds from the clay matrix. As a result of
these problems, processing of gravels from the initial SP3 excavation has not
yet been completed, although one block from SP3 from which a significant portion
of the excavated gravel has been treated has produced a grade of approximately
10 carats/100 tonnes. In the meantime, lower grade gravel stockpiles are being
processed while new mining areas are being opened up.
Commissioning of the new dense media separation plant (DMS) commenced during the
second half of the year. Final tests on the DMS are being completed and it is
expected to go into full production in January. Plans will be made to operate
the DMS on a double shift basis once sufficient stockpiles of gravel are
available.
Exploration activity continued at Avontuur, with the most significant
development being the acquisition of data from a high resolution airborne
electromagnetic survey covering the entire property. Interpretation of this
data has identified 6 new exploration targets, on which drilling has commenced.
A total of 6,736 metres of percussion drilling was carried out over 389 holes
during the year.
A prospecting permit for a new area to the east of Avontuur was granted during
the period. This area contains a number of promising exploration targets, and
exploration will commence in the coming year.
Exploration
Groen River Valley, Namaqualand, 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.
A substantial amount of ground mapping and aerial photo analysis was carried out
during the year to identify targets for the next phase of drilling and sampling.
In the course of this work a number of significant new extensions to the
target Groen River palaeo channels were identified. Prospecting permit
applications were lodged for these areas, which, when granted, will more than
double the size of our land position in the area. Drilling will resume in the
Groen River Valley in the new year. We remain confident that the Groen River
Valley has the potential to become an important new alluvial diamond-producing
region. Based on 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.
During the year the Company lodged prospecting permit applications covering a
new palaeo river system in Namaqualand. This system is known to be
diamondiferous. Satellite and aerial photo interpretation have already
identified palaeo channels over a length of more than 10 kilometres. Drilling
and bulk sampling will be carried out on these channels once the prospecting
permits have been issued.
Mopipi, 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. Exploration
work at the Mopipi project during the year was focused on the Mopipi Dam area,
where previous sampling had produced an intense concentration of samples with
exceptionally high counts of kimberlitic indicator minerals, indicating the
presence of diamondiferous kimberlite in the area.
A high resolution helicopter-borne magnetic survey was conducted in the area
surrounding Mopipi Dam with the objective of properly defining and delineating
drilling targets and to provide precise locations for the siting of drill holes.
The survey was conducted over an area of approximately 100 square kilometres,
representing approximately 3% of the area covered by Firestone's prospecting
licences in the Mopipi region.
Data from this survey was interpreted and integrated with data from previous
gravity and magnetic surveys and correlated with the results of soil sampling
and mapping work. This resulted in the identification of more than 100
potential kimberlite drilling targets, some of which coincided with targets
already identified by indicator mineral counts and analysis. It was decided to
use Mobile Metal Ion (MMI) geochemical sampling in order to reduce the number of
and prioritise these targets for the first phase of the drilling programme. MMI
analysis is a relatively new technique that is used to identify the location at
which mobile metal ions are released at the surface from a buried source.
Surface samples were taken at the centre points of the higher ranked geophysical
anomalies. These samples were subjected to MMI analysis for
kimberlite-associated metals such as niobium, chrome and nickel. A significant
number of geophysical targets exhibited pronounced MMI anomalies of
kimberlite-associated metals, indicating a local kimberlitic source. These
targets were selected as top priority drilling targets.
The initial drilling programme was planned on the basis that kimberlites in the
Mopipi area would, like most kimberlites in Botswana, be of a similar age to the
nearby Orapa kimberlites, which were intruded through the Karoo sandstone.
Accordingly, the drilling objective was to drill the targets until either
kimberlite or Karoo sandstone was intersected. Eighteen targets were selected
for drilling using a four inch reverse circulation drill rig. All drill holes
were terminated in Karoo sandstone, without encountering kimberlite.
As drilling failed to identify the source of the strong kimberlitic indicator
mineral anomalies that were recovered in the Mopipi Dam area, it was decided to
process and analyse material recovered from the drill holes. This work was
carried out on site and resulted in the unexpected recovery of a significant
number of kimberlitic pyrope and other suspected kimberlitic indicator minerals
from the Karoo sandstone. This development has a number of significant
implications. First, as the Karoo sandstone predates the intrusion of the Orapa
kimberlites, the kimberlitic indicator minerals that were recovered from the
Karoo cannot have been derived from the Orapa field, thus proving that there is
another kimberlite source in the region in addition to the Orapa field. The
second implication is that the kimberlite source in the Mopipi region is likely
to lie at a greater depth than has been considered likely until now.
More detailed examination and analysis of the indicator minerals recovered from
the Karoo is currently being carried out, but the drilling results already
indicate that the emplacement model for kimberlite in the Mopipi area is more
complex than first thought. The results will also necessitate a re-evaluation
of our geophysical data to ensure that the targets that have been identified are
consistent with this new model. This work is currently being carried out, and
further drilling will take place once the results have been received and
interpreted.
While we are disappointed that we did not intersect kimberlite in the first
phase of our drilling programme, we have made significant progress in our
understanding of the geology of the region, and we continue to believe that the
potential for the discovery of a new kimberlite field in the Mopipi region is
very good.
During the year, a new anomalous indicator mineral trail was identified to the
east of our current prospecting licence areas. As a result, the Company applied
for and was granted a new prospecting licence over this area, totalling some 936
square kilometres. Satellite and aerial photo interpretation work has been
carried out in selected parts of this area, known as Mopipi East. Initial
reconnaissance soil samples have been taken and processing and analysis are
currently under way. A significant new chrome diopside anomaly was recently
identified in Mopipi South, and follow-up sampling in this area is currently
being planned.
The Diamond Market
De Beers' sales declined by approximately 20% from the record level of $5.7
billion in 2000 to $4.5 billion in 2001, driven by poor global economic
conditions, particularly in the United States, although global retail diamond
jewellery sales dropped by only 5%. The rough diamond market has recovered
strongly in 2002, with De Beers' sales for the first six months rising 8.5% to
$2.8 billion. 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 in 2001 and strengthening in 2002. This trend is expected to
continue. The longer term outlook for diamond prices continues to be positive,
as analysts continue to project a supply deficit in the diamond market for the
next 3-5 years, with prices expected to increase as a result.
Financial
Although operational difficulties resulted in a shortfall in production at
Avontuur, most of this was offset by increased production from Oena, resulting
in group production declining by approximately 10%. Operating profit was lower
due to significant increases in development expenditure at both Avontuur and
Oena.
In November 2001 the Company completed a share placing to raise approximately
#2.2 million. The primary purpose of the fund raising was to finance a more
aggressive exploration programme at Mopipi and to accelerate development work at
the Oena Mine. All the Company's significant capital and exploration programme
commitments in this respect have been met. The Company remains debt free and
currently has cash reserves and diamond stocks of approximately #1.1 million.
Outlook
The passing of the new Minerals Bill in the South African parliament and the
publication of the associated draft Mining Charter have created a lot of
publicity in recent months. One of the key aspects of the Bill is that it will
transfer all privately held mineral rights, which comprise about 60% of the
total in South Africa, to the State. The main purpose of the Charter is to
support the South African government's black economic empowerment (BEE)
objectives. While the large South African mining companies will be
significantly affected by these developments, we do not expect any significant
negative impact on Firestone, as the mineral rights at all of Firestone's South
African projects are already State-owned. Under the new Bill, compliance with
BEE requirements will be reviewed at the time of mining and/or prospecting
permit renewal. As Firestone's permits at Oena and Avontuur do not require
renewal for another 5 years, we will have ample time to comply with the
requirements.
Firestone's BEE strategy has developed substantially beyond meeting the minimum
requirements specified in the Charter. One of the consequences of the new
legislation is that many diamond-related assets that would otherwise have
remained undeveloped will become available. We intend to pursue these
opportunities through partnering with a South African BEE company and we believe
that this strategy will open up significant new growth prospects for the
Company. Negotiations with a prominent South African company in relation to a
BEE joint venture are at an advanced stage, and we expect to announce specific
details on our plans in the near future.
Looking forward, we are confident that production will increase substantially
during the coming year. We also intend to continue to take advantage of the
Company's extensive data and expertise to identify attractive, low cost diamond
mining and exploration opportunities, and expect to acquire one new mining
project and two new exploration projects in Namaqualand in the current year.
Finally, I would like to record the Board's appreciation of the continued
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
13 December 2002
For further information:
Philip Kenny, Firestone Diamonds 020 7370 6452 / 07831 324 645
Leesa Peters, Capital PR 020 76187889 / 07812 159 885
Jamie Cumming, Bell Lawrie White 0141 314 8103 / 0776 8044 620
Website: www.firestonediamonds.com
FIRESTONE DIAMONDS PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR
THE YEAR ENDED 30 JUNE 2002
2002 2001
# #
Production 885,964 987,197
Turnover 842,334 951,219
Change in stocks of finished goods and in work in progress 43,630 35,978
Other operating income - 725
Raw materials and consumables (26,169) (11,535)
Staff costs (90,542) (72,699)
Depreciation and amortisation (62,882) (149,163)
Other operating charges (558,924) (371,428)
Operating profit 147,447 383,097
Interest receivable and similar income 46,630 5,449
Interest payable and similar charges (945) (1,001)
Profit on ordinary activities before taxation 193,132 387,545
Tax on profit on ordinary activities (49,314) (111,247)
Profit on ordinary activities after taxation 143,818 276,298
Minority interests (19,271) (14,110)
Retained profit for the year 124,547 262,188
Earnings per share
Basic earnings per share 0.4p 0.9 p
Diluted earnings per share 0.4p 0.9 p
Turnover is wholly derived from continuing activities.
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES FOR THE YEAR ENDED 30 JUNE 2002 # #
Profit for the financial year 124,547 262,188
Currency translation differences (161,151) (44,605)
Total recognised gains and losses for the year (36,604) 217,583
FIRESTONE DIAMONDS PLC
CONSOLIDATED BALANCE SHEET
30 JUNE 2002
2002 2001
# # # #
FIXED ASSETS
Intangible assets 7,531,142 6,154,823
Tangible assets 1,180,034 1,601,671
Investments 285,934 176,386
8,997,110 7,932,880
CURRENT ASSETS
Stocks 90,637 69,478
Debtors 275,376 35,531
Cash at bank and in hand 1,472,463 417,741
1,838,476 522,750
CREDITORS
Amounts falling due within
one year (686,433) (468,002)
NET CURRENT ASSETS 1,152,043 54,748
TOTAL ASSETS LESS CURRENT LIABILITIES 10,149,153 7,987,628
CREDITORS
Amounts falling due after one year (4,110) (9,674)
PROVISIONS FOR LIABILITIES
AND CHARGES
Other provisions (12,743) (17,641)
Deferred taxation (267,450) (280,139)
(280,193) (297,780)
NET ASSETS 9,864,850 7,680,174
CAPITAL AND RESERVES
Called up share capital 6,840,094 6,072,615
Share premium account 3,648,123 2,213,593
Other reserves (1,076,399) (1,076,399)
Profit and loss account 475,507 512,111
SHAREHOLDERS' FUNDS 9,887,325 7,721,920
Minority interests (22,475) (41,746)
9,864,850 7,680,174
FIRESTONE DIAMONDS PLC
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 30 JUNE 2002
2002 2001
# # # #
Net cash inflow from operating activities 186,569 764,442
Returns on investments and servicing of finance
Interest received 46,630 5,449
Interest element of finance lease payments (945) (1,001)
Net cash inflow from returns on
investments and servicing of finance 45,685 4,448
Capital expenditure and financial investment
Payments to acquire intangible fixed assets (1,074,706) (982,931)
Payments to acquire tangible fixed assets (162,663) (322,409)
Receipts from sales of tangible fixed assets 2,234 33,585
Payments to acquire investments (109,548) (70,510)
Net cash outflow from capital expenditure
and financial investment (1,344,683) (1,342,265)
Acquisitions and disposals
Payment of deferred consideration for
subsidiary undertaking - (3,425)
Net cash outflow from acquisitions and disposals - (3,425)
Net cash outflow before use of liquid
resources
and financing (1,112,429) (576,800)
Financing
Issue of ordinary share capital 2,202,009 -
Capital element of finance lease payments (2,925) (4,126)
2,199,084 (4,126)
Increase/(decrease) in cash 1,086,655 (580,926)
Approved by the Board on 13 December 2002
Notes to the preliminary statement of results for the year ended 30 June 2002
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 2002 annual report
and financial statements.
2. Earnings per share
Basic earnings per share is based on a profit of #124,547 (2001: #262,188) and a
weighted average number of shares in issue of 32,832,201 (2001: 30,363,078).
Diluted earnings per share is based on a profit of #124,547 (2001: #262,188).
The weighted average number of shares used to calculate diluted earnings per
share incorporates the weighted average number of shares in issue of 32,832,201
(2001: 30,363,078) plus dilutive potential ordinary shares arising from share
options of 1,453,836 (2001: 41,315) totalling 34,286,037 (2001: 30,404,393).
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 2002 statutory financial statements,
which were approved by the Board on 13 December 2002. 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 EC4 N6NQ on 31 January, 2003 at 12 p.m.
5. Dividends
The directors are not declaring a dividend for the period.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR IIFIDFLLRLIF
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