TIDMFDI
RNS Number : 7011W
Firestone Diamonds PLC
24 November 2010
Firestone Diamonds plc
Preliminary announcement of results for the year ended 30 June,
2010
LONDON: 24 November, 2010
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, 2010.
HIGHLIGHTS
BK11 Mine, Botswana
-- Mine development
- Development decision made in December 2009
- 11.5 Mt of kimberlite to be mined at an average
grade of 8.5 cpht
- Mining licence granted and production commenced
in July 2010
-- Earthmoving
- 840,000 tonnes of overburden and low grade kimberlite
stripped to end October
- Pre-stripping to be completed by end November
-- Production plant
- Phase 1 fully operational
- Phase 2 on schedule to reach full capacity by
end 2010
-- Diamond recoveries and sales
- Diamond recoveries continue to be of good quality;
high quality 13.74 carat diamond recovered
- Construction and commissioning of diamond sorting
facility completed
- First diamond sale to commence end November by
open tender in Botswana
Liqhobong Mine, Lesotho
-- Acquisition of Kopane Diamond Developments plc
- Acquisition completed at the end of September
2010
- 91 Mt resource identified at an average grade
of 34 cpht; contains 31 million carats with a
gross value of $2.7 billion
-- Initial mine planning studies completed
- 60 Mt mineable by open pit to depth of 390 metres
- No waste stripping for first 9 Mt
-- Mine development plan completed
- Mining operations to recommence in 2011
- Capacity of Plant 1 to be tripled to 1.3 Mtpa,
with target annual production of $36m
- Plant 2 development plan completed, with target
capacity of 4.2 Mtpa and annual production of
$116m
-- Diamond sales
- Stockpiled Liqhobong production to be sold at
upcoming tender in Botswana
Financial & Board
-- Financings
- GBP7.2 million raised in July 2009 and GBP9.45
million in April 2010 from share placements
- Terms agreed for a $6 million credit facility
in respect of the BK11 Mine
-- Secondary listing on Botswana Stock Exchange
- Application delayed pending completion of Kopane
acquisition
- Listing expected to take place by end 2010
-- Board changes
- T Wilkes to join the board; new Finance Director
candidates identified
- J F Kenny and H Jenner-Clarke to step down as
directors
- New non-executive directors to be appointed
Outlook
-- Production from BK11 and Liqhobong in 2011
-- Continued strength in the rough diamond market
-- Target production level of 1 million carats per annum
by 2014
Philip Kenny, CEO of Firestone Diamonds, commented: "The past
year has been a transformational one for Firestone. With the
commencement of production at BK11 in Botswana in July 2010,
Firestone became one of only three junior listed kimberlite
producers worldwide. The acquisition of Liqhobong in Lesotho in
September 2010 gave Firestone control of one of the most attractive
undeveloped kimberlites in the world. Together with our extensive
portfolio of kimberlites in the Orapa and Tsabong kimberlite fields
in Botswana and the significant shortfall in rough diamond supply
projected in the coming years, Firestone is now very well
positioned to become a significant diamond producer. "
Analyst conference call, Wednesday 24 November 2010 - 11:00am
(BST)
Firestone Diamonds plc will be hosting a conference call today
at 11:00am (BST) for interested parties.
To access the conference call, please dial: +44 (0) 20 3140 0668
and enter the PIN number: 469719#.
To access the live webcast presentation, go to:
https://www.anywhereconference.com/; Webcast login: 113375257; PIN
code: 469719
A webcast of the presentation will be available on the Company's
website from 4pm today.
For further information, visit the Company's web site or
contact:
+44 20 8834 1028/+44 7831
Philip Kenny, Firestone Diamonds 324 645
Simon Edwards / Tim Redfern, Evolution
Securities (Joint Broker) +44 20 7071 4330 / 4312
Rory Scott, Mirabaud Securities
(Joint Broker) +44 20 7878 3360
Alexander Dewar / Neil McDonald,
Brewin Dolphin Corporate Advisory
& Broking
(Nominated Adviser) +44 131 529 0276
Jos Simson, Conduit PR +44 20 7429 6603/+44 7899
870 450
Dear Shareholder,
The past year has been a transformational one for Firestone and
probably the most significant in the Company's history. The
commencement of mining operations at the BK11 Mine in Botswana,
which resulted in Firestone becoming one of only three junior
listed kimberlite producers worldwide, was the first significant
milestone. The second milestone was the acquisition of Kopane
Diamond Developments plc ("Kopane"), as a result of which Firestone
gained control of the Liqhobong Mine in Lesotho, which we consider
to be a world class asset and one of the most attractive
undeveloped kimberlites in the world.
BK11 Mine
In July 2009 the Company commenced work on the final phase of
evaluation on BK11. Following completion of this work in December
2009, the Company announced that it intended to proceed to mine
development.
Mine Development
Under the BK11 mine plan approximately 11.5 million tonnes of
kimberlite is expected to be mined at an average grade of 8.5
carats per hundred tonnes ("cpht"), giving total production of
approximately 1 million carats over a 10 year mine life at an
average price of $155/carat. In the KW area, where the current
mining pit is located, approximately 5.4 million tonnes of
kimberlite is expected to be mined at an average grade of 12.6
cpht, with an average diamond value of $175/carat.
Development work commenced at BK11 at the beginning of 2010 and
Phase 1 of the production plant, which has a capacity of
approximately 650,000 tonnes per annum, was completed on schedule
in Q2 2010. A mining licence application was submitted in Q1 2010
and in July 2010 the Company announced that a mining licence had
been granted and that commercial production had commenced.
Earthmoving
Pre-stripping of overburden and near-surface low grade
kimberlite commenced following granting of the mining licence and
by the end of October over 840,000 tonnes of material had been
removed. Completion of the pre-stripping work is currently four
weeks behind schedule due to more difficult mining conditions being
encountered in the calcretised overburden and a revised stripping
plan that will allow an increased mining rate to be sustained in
2011 and 2012. It is expected that pre-stripping will be completed
and the first kimberlite targeted for mining will be available for
treatment at the end of November.
Production Plant
Commissioning of Phase 1 of the production plant was completed
at the end of July. Material processed through the production plant
to date has been sourced from low grade kimberlite stockpiles from
the 2009 bulk sampling programme and from the current pre-stripping
activities. Plant performance to date has been good, although plant
availability was impacted by generator problems caused by the
supply of poor quality diesel. These problems have now been
resolved.
Diamonds recovered from the production plant have continued to
be of high quality, similar to those recovered from bulk sampling
operations, and include a high quality 13.74 carat diamond.
Phase 2 of the production plant is expected to reach full
production capacity on schedule by the end of 2010. Based on plant
performance to date, the Company expects that the target production
level of 1.5 million tonnes per annum will be comfortably exceeded
in 2011.
Diamond Sales
The Company has recently completed the commissioning of its
diamond sorting facility at the Diamond Technology Park ("DTP") in
Gaborone. The facility has been designed to accommodate diamond
tenders. The first tender of approximately 3,000 carats from BK11
is scheduled to commence at the end of November 2010 and to be
concluded in early December.
Liqhobong Mine
During the year, Firestone entered into negotiations that
resulted in agreement being reached on the terms of a recommended
all share offer by the Company for Kopane. Kopane's principal asset
is a 75% interest in the Liqhobong Mine in Lesotho, where a
resource of 91 million tonnes at an average grade of 34 cpht
containing 31 million carats has been identified at the Main Pipe.
With an average estimated diamond value of $86/carat and a
contained value of approximately $2.7 billion, Liqhobong is
considered by the Company to be one of the most attractive
undeveloped kimberlites in the world. The Kopane acquisition was
completed at the end of September 2010, and significant progress
has been made since then.
Mine Development Plan
Initial mine planning and pit optimisation studies have been
completed. The results of these studies indicate that open pit
mining operations can be undertaken to a depth of 390 metres and
would result in the mining of approximately 60 million tonnes of
kimberlite and 19 million carats over a period of approximately 17
years. No waste stripping will be required for the first 9 million
tonnes. It is expected that the depth to which open pit mining
operations can be extended will be increased as further studies are
undertaken.
Firestone's technical personnel have undertaken a detailed
review of the current plant (Plant 1) and of the work carried out
on the Definitive Feasibility Study ("DFS") for the construction of
new, larger plant (Plant 2), with the objective of preparing a plan
for the recommencement and expansion of production at Liqhobong in
2011. The most significant conclusion of the review is that the
capacity of Plant 1 can be tripled relatively quickly and at low
cost, which will allow significant revenues to be generated well in
advance of Plant 2 being put into operation. Highlights of the mine
development plan, which has now been completed, are as follows:
Plant 1 Expansion
Development
Capacity time Capex estimate Annual revenue
(mtpa) (Months) ($m) ($m)
--------- ------------ --------------- ---------------
0.4 1 1 11
--------- ------------ --------------- ---------------
0.65 3 3 18
--------- ------------ --------------- ---------------
1.3 9 5 36
--------- ------------ --------------- ---------------
Firestone intends to recommence production and undertake the
expansion programme at Plant 1 in 2011 using cash flow from mining
operations at BK11. Further details of these plans are being
finalised and will be announced in due course.
Plant 2 Development
While some additional work is still required to complete the
DFS, preliminary plans have been prepared for the development of
Plant 2, as outlined below. It is expected that the decision to
commence construction of Phase 1 will be made in 2012, which would
result in Plant 2 commencing production in 2013.
Development Capex
Capacity time estimate Annual revenue
(mtpa) (Months) ($m) ($m)
------------ ------------ ---------- ---------------
2.5 (Phase
1) 18 45 71
------------ ------------ ---------- ---------------
4.2 (Phase
2) 12 25 116
------------ ------------ ---------- ---------------
Resources and Reserves
An independent review has been undertaken by MPH Consulting
Limited of the Liqhobong resource and of the proposed mine
development plan. This review has resulted in the declaration of a
SAMREC-compliant probable reserve of 37 million tonnes at an
average grade of 31 cpht containing 12 million carats. The MPH
review has also identified the potential for a significant upgrade
to the resource grade, which was based on the results from 1,700
tonnes of kimberlite sampled by 28 17" diameter drill holes. These
samples are relatively small and the grade estimates on which they
are based are likely to be conservative. This is borne out by the
fact that subsequent surface bulk sampling of 34,000 tonnes
produced an average grade of 38 cpht. Firestone intends to remodel
the resource grades using the surface bulk sampling results, and
expects the resource grade to increase as a result. This work will
be undertaken in H1 2011.
Diamond Sale
Subject to the receipt of necessary approvals from the Lesotho
regulatory authorities, Firestone intends to offer for sale a
parcel of over 10,000 carats recovered from previous operations at
Liqhobong at the Company's upcoming tender in Botswana.
Other Botswana Projects
In addition to BK11, Firestone controls 21 other kimberlites in
the Orapa kimberlite field, of which 13 have been proven to be
diamondiferous, and 86 kimberlites in the Tsabong kimberlite field,
of which 16 have been proven to be diamondiferous. The Company
believes that the likelihood of further economic discoveries being
made in these kimberlites is very good. While Liqhobong and BK11
will be the Company's primary focus in 2011, Firestone intends to
use cash flow from its mining operations to evaluate these
kimberlites with the objective of identifying additional resources
that can be developed and brought into production. The Company also
intends to continue to pursue toll treatment opportunities such as
the Jwaneng tailings projects with Debswana, although
implementation of this project was delayed by Debswana in September
2010.
Financial
No revenue was generated during the year, as the Company's
activities were exclusively focused on development work at BK11 and
on the Kopane acquisition. The Company raised GBP7.2 million in
July 2009 and GBP9.45 million in April 2010 from share placements
to finance the development of BK11 and the Company's other projects
in Botswana, and to provide general working capital for the
Company.
The acquisition of Kopane was the most significant event over
the past year. This acquisition was implemented by way of the
issuance of 0.4657 Firestone shares for every Kopane share. As a
result of this acquisition Kopane shareholders were issued with new
Firestone shares equivalent to 52% of Firestone's enlarged share
capital.
The Company has recently agreed terms for a credit facility of
$6 million in respect of the BK11 Mine. This facility will give the
Company greater flexibility in planning and financing its
activities elsewhere in Botswana and in Lesotho. The facility is
expected to be finalised shortly, at which time further details
will be made available.
In Q1 2010 the Company announced that it intended to apply for a
secondary listing of shares in the Company on the Botswana Stock
Exchange. Submission of the listing application was delayed pending
completion of the Kopane acquisition, and listing is now expected
to take place before the end of 2010.
Board
At the time that the Kopane offer was made in July 2010 the
Company indicated that it intended to appoint Tim Wilkes, our Chief
Operating Officer, to the Board and to recruit a new Finance
Director with significant experience in the mining sector in
Southern Africa. Tim Wilkes is expected to join the board shortly,
and a number of candidates have been identified for the Finance
Director position.
Considering the significant expansion in nature and scale of the
Company's operations over the past year and the further expansion
that is expected as production commences at Liqhobong in 2011, we
believe that additional changes will be required to strengthen the
Board and to ensure that it has the right balance of skills and
experience to guide the Company through the next stage of its
development. Hugh Jenner-Clarke and I, who have both been directors
since the Company listed on AIM in 1998, have therefore agreed to
step down from the Board following the forthcoming annual general
meeting in order to make way for new directors who will be able to
assist the Board in meeting the challenges that lie ahead. A number
of potential candidates have been identified and the Company
expects to be able to announce new appointments in due course. I am
pleased to report that Michael Hampton has agreed to act as
Chairman on an interim basis until a replacement has been
selected.
Outlook
With Firestone planning to be producing at both BK11 and
Liqhobong in 2011, an exciting portfolio of projects to evaluate in
Botswana, and the continued positive outlook for the rough diamond
market, we believe that the prospects for Firestone are brighter
than at any time in the Company's history. We are confident that
the target of producing 1 million carats per annum by 2014 is one
that the Company is now well positioned to reach.
As this will be the last set of financial results that I report
on as Chairman, I would like to put on record my thanks to those
shareholders who have continued to support the Company as it has
developed and to the management and staff whose commitment and
skills have greatly contributed to the Company's progress. I look
forward to following the Company's future successes.
James F Kenny
Chairman
23 November 2010
Consolidated statement of comprehensive income
2010 2009
GBP000 GBP000
Revenue 3 4,034
Raw materials and consumables used (180) (170)
Employee costs (477) (801)
Amortisation and depreciation (369) (640)
Impairment of mineral rights and
mining properties - (8,773)
Impairment of goodwill - (2,473)
Impairment of property, plant and
equipment (200) -
Release of rehabilitation provisions 528 -
Acquisition expenses (1,234) -
Other operating expenses (490) (1,728)
Operating loss (2,419) (10,551)
Financial income 24 117
Finance expense (11) (324)
Loss before tax (2,406) (10,758)
Taxation - (233)
Loss after tax for the year (2,406) (10,991)
Other comprehensive income:
Exchange differences on translating
foreign operations net of tax 1,135 4,318
Total comprehensive income and expense
for the year (1,271) (6,673)
Loss after tax for the year attributable
to:
Equity holders of the parent (2,478) (10,991)
Non-controlling interest 72 -
Total comprehensive income for the
year attributable to:
Equity holders of the parent (1,346) (6,673)
Non-controlling interest 75 -
Basic loss per share (2.3)p (17.9)p
Basic loss per share (2.3)p (17.9)p
All amounts relate to continuing
operations.
Consolidated statement of financial position
2010 2009
GBP000 GBP000
Assets
Non-current assets
Intangible mining assets 20,129 15,485
Property, plant and equipment 14,568 8,771
34,697 24,256
Current assets
Inventories 29 29
Trade and other receivables 1,013 586
Cash and cash equivalents 5,645 1,019
6,687 1,634
Total assets 41,384 25,890
Equity and liabilities
Equity
Share capital 25,578 12,346
Share premium 25,380 22,768
Merger reserve (1,076) (1,076)
Translation reserve 429 (703)
Accumulated losses (15,106) (12,905)
Total equity attributable to equity
holders of the parent 35,205 20,430
Non-controlling interests 75 -
Total equity 35,280 20,430
Non-current liabilities
Interest-bearing loans and borrowings 1,193 1,864
Deferred tax - -
Provisions - 188
1,193 2,052
Current liabilities
Interest-bearing loans and borrowings 1,168 1,137
Trade and other payables 3,045 1,361
Current tax liabilities 229 -
Provisions 469 910
4,911 3,408
Total liabilities 6,104 5,460
Total equity and liabilities 41,384 25,890
Consolidated statement of changes in equity
Share Share Merger Translation Accumulated Non-controlling Total
capital premium reserve reserve losses Total interests equity
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
At 1 July 2008 11,170 19,278 (1,076) (5,021) (2,257) 22,094 - 22,094
Comprehensive
income
Loss for the
year - - - - (10,991) (10,991) - (10,991)
Other
comprehensive
income for the
year
Exchange
differences
on
translating
foreign
operations - - - 4,318 - 4,318 - 4,318
Total
comprehensive
income/(loss)
for the year - - - 4,318 (10,991) (6,673) - (6,673)
Shares issued
in the year 1,176 3,824 - - - 5,000 - 5,000
Share issue
expenses - (334) - - - (334) - (334)
Share-based
payment
adjustment - - - - 343 343 - 343
At 30 June
2009 12,346 22,768 (1,076) (703) (12,905) 20,430 - 20,430
-------- -------- -------- ------------ ------------ --------- ---------------- ---------
At 1 July 2009 12,346 22,768 (1,076) (703) (12,905) 20,430 - 20,430
Comprehensive
income
Loss for the
year - - - - (2,478) (2,478) 72 (2,406)
Other
comprehensive
income for the
year
Exchange
differences
on
translating
foreign
operations - - - 1,132 - 1,132 3 1,135
-------- -------- -------- ------------ ------------ --------- ---------------- ---------
Total
comprehensive
income/(loss)
for the year - - - 1,132 (2,478) (1,346) 75 (1,271)
Shares issued
in the year 13,232 3,480 - - - 16,712 - 16,712
Share issue
expenses - (868) - - - (868) - (868)
Share-based
payment
adjustment - - - - 277 277 - 277
-------- -------- -------- ------------ ------------ --------- ---------------- ---------
At 30 June
2010 25,578 25,380 (1,076) 429 (15,106) 35,205 75 35,280
-------- -------- -------- ------------ ------------ --------- ---------------- ---------
Consolidated statement of cash flows
2010 2009
GBP000 GBP000
Cash flow from operating activities
Loss before taxation (2,406) (10,758)
Adjustments for:
Depreciation, amortisation and impairment 570 11,791
Effect of foreign exchange movements 157 894
Interest payable 11 323
Equity-settled share-based payments 277 343
Net cash flow from operating activities
before changes
in working capital (1,391) 2,593
Decrease in inventories - 26
(Increase)/decrease in trade and
other receivables (426) 737
Increase/(decrease) in trade and
other payables 1,926 (322)
(Decrease)/increase in provisions (739) 180
Net cash flow from operating activities (630) 3,214
Investing activities
Payments for property, plant and
equipment (5,472) (1,268)
Payments for non-current intangible
assets (3,991) (5,635)
Net cash flow from investing activities (9,463) (6,903)
Financing activities
Issue of ordinary shares 16,712 5,000
Share issue expenses (868) (334)
Proceeds from long-term borrowings - 900
Proceeds from lease finance arrangements 140 -
Repayment of long-term borrowings (1,082) (905)
Repayment of lease finance (12) (11)
Interest paid (171) (323)
Net cash flow from financing activities 14,719 4,327
Net increase in cash and cash equivalents
in the year 4,626 638
Cash and cash equivalents at the
beginning of the year 1,019 381
Cash and cash equivalents at the
end of the year 5,645 1,019
Notes
1. Basis of preparation
Whilst the financial information included in this announcement
has been prepared in accordance with International Financial
Reporting Standards (IFRS), this announcement does not contain
sufficient information to comply with IFRS. The Company will
publish full financial statements that comply with IFRS in December
2010.
The financial information set out in the announcement does not
constitute the Company's statutory accounts for the year ended 30
June 2010 or the year ended 30 June 2009. The financial information
for the year ended 30 June 2010 and the year ended 30 June 2009 are
extracted from the statutory accounts of Firestone Diamonds plc.
The auditors, PKF (UK) LLP, reported on those accounts; their
report was unqualified and did not contain a statement under
section 498(2) or 498(3) of the Companies Act 2006.
The 2010 accounts have been prepared on a basis consistent with
the accounting policies set out in the 2009 accounts.
The consolidated financial statements of the Company for the
year ended 30 June 2010 comprise the Company and its subsidiaries
(together referred to as the "Group"). The Group is primarily
involved in diamond exploration and production in Southern Africa.
The Directors regularly review cash flow forecasts to determine
whether the Group will have sufficient cash reserves to meet future
working capital requirements, progress its exploration projects and
take advantage of business opportunities that may arise.
The Group's mining operations at BK11 have commenced since the
year end. Based on performance at BK11 to date and its forecast
operating cash flows and the forecast cash flows in respect of the
rest of the Group's activities, the Directors are satisfied that
the Group will have sufficient cash resources to continue its
operations and meet its commitments for the foreseeable future. In
arriving at this conclusion they have also taken into consideration
that the Group has agreed terms in respect of a $6 million credit
facility. This facility will give the Group significantly more
flexibility in planning and managing its operations at BK11,
Liqhobong and elsewhere, and draw down is subject to conditions
precedent that the Company is confident will be satisfied. The
Directors have therefore concluded that it is appropriate for the
financial statements to be prepared on a going concern basis.
2. Acquisition expenses and impairment charges included within
operating loss
In the year the Group and Company incurred fees and expenses
amounting to GBP1,234,000 arising from the pending acquisition of
Kopane Diamonds Developments plc. This acquisition was completed on
29 September 2010.
3. Loss per share
The calculation of the basic loss per share is based upon the
net loss after tax attributable to ordinary shareholders of
GBP2,406,000 (2009: loss of GBP10,991,000) and a weighted average
number of shares in issue for the year of 103,197,603 (2009:
61,329,293). The diluted loss per share in 2010 and 2009 is the
same as the basic loss per share as the potential ordinary shares
to be issued have an anti-dilutive effect.
On 29 September 2010 the Group issued new equity totalling
140,413,477 ordinary shares of GBP0.20 each.
4. Annual General Meeting
The company's Annual General Meeting will be held at MWB
Business Exchange, 60 Cannon Street, London EC4N 6NP on 23
December, 2010 at 11 am.
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).
7. Announcement and Annual Report
This announcement was approved by the board on 23 November 2010.
The Annual Report for the year ended 30 June 2010, including the
auditors' report, will be posted to shareholders and will be
available from the same date to be downloaded from the Company's
website at www.firestonediamonds.com.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR DMMZMGFKGGZZ
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