RNS Number:1621X
Firestone Diamonds PLC
31 March 2004
Firestone Diamonds plc
Unaudited interim results for the six months to 31 December, 2003
LONDON: 31 March, 2004 - The Board of Firestone Diamonds plc, ("the Company"),
the UK-based diamond mining and exploration company, announces unaudited interim
results for the six months to 31 December, 2003.
HIGHLIGHTS
Financial
* After tax profits increased 22% to #134,404
* Rough diamond prices increased 15% in 2003 and 8% to date in 2004
* Share placement in August 2003 raised approximately #1.88 million after
expenses
Bonte Koe Mine, South Africa
* Entered into an agreement to acquire the Bonte Koe Mine
* Mine re-development work at an advanced stage
* Mining operations expected to commence in first half of 2004
Avontuur Mine, South Africa
* New dense media separation plant fully operational during the period
* Production increased 184% to 2,900 carats
* Average value of gem quality diamonds sold increased 15% to $126 per
carat
Oena Mine, South Africa
* Overall production declined 63% due to dispute with mining contractor;
production from Firestone's operations increased 30% to 363 carats
* Average value of diamonds sold increased 42% to $1,207 per carat
Groen River Valley, South Africa
* Drilling programme completed and major new gravel deposit identified
* Full interpretation of drilling results to be completed and results
announced shortly
* Bulk sampling of new deposit and further drilling to take place later
in the year
* Awaiting issue of prospecting permit for new area
Mopipi, Botswana
* New field exploration programme to commence in the next quarter
* Joint venture discussions at an advanced stage and expected to be
concluded shortly
Exploration
* New exploration permits expected to be issued in Namaqualand
* Significant new exploration project to be announced shortly
Dear Shareholder,
The period saw continued progress in the development of Firestone's mining
operations and exploration projects. The primary focus at our mining operations
was on planning for the commencement of mining operations at the Bonte Koe Mine
through African Star Minerals, the Company's black empowerment joint venture.
Bonte Koe is expected to make a substantial impact on the Company's revenues and
profitability once it reaches full production.
Exploration activity during the period was mainly concentrated on the Groen
River Valley, where drilling has indicated the presence of at least one
significant gravel deposit that is likely to be diamondiferous and will be
sampled later in the year. We have continued discussions with potential joint
venture partners in respect of our Mopipi project, and expect to conclude a
joint venture on the project in the near future, following which a new field
exploration programme will commence.
Mining
Bonte Koe Mine, Namaqualand, South Africa
In July 2003, the Company announced that it had agreed to acquire the Bonte Koe
Mine in Namaqualand,and that it intended to re-establish mining operations at
Bonte Koe through its black-empowerment joint venture, African Star Minerals.
The primary focus of the Company's mining operations during the rest of the
period was on finalising plans for the development of new mining operations at
Bonte Koe. An independent review of the development plans for Bonte Koe was
carried out during the period, and covered treatment plant design, metallurgical
specifications, and mining and exploration plans. Following this review, a
supplier for the construction of a dense media separation ("DMS") gravel
treatment plant was selected. An evaluation of exploration potential at Bonte
Koe and other opportunities on the Buffels River was carried out recently, as a
result of which it was decided to increase the capacity of the DMS plant from
100 to 150 tonnes per hour. This will allow the Company to increase the mining
rate at Bonte Koe, and will also give the mine the capacity to process gravel
from other locations on the Buffels River.
As the Company intends to expand its resource base and the scale of its
operations in the Buffels River area, we have decided to upgrade the power and
water infrastructure planned for Bonte Koe. Initial plans were to generate
power on site and to truck process water for the DMS plant, but the Company has
instead decided to construct a 10 km power line from the nearest Eskom
substation, and to lay a 35km pipeline from the source of the process water
supply that has been secured for the mine. While construction costs will be
higher as a result of this decision, operating costs savings will be
substantial, and are expected to pay for the capital costs during the first two
years of operation.
Development work at Bonte Koe is now at an advanced stage. A project team of
more than 50 people is currently working on the project, both on site and at the
DMS plant supplier's facilities. Refurbishment of accommodation, workshop and
office facilities is at an advanced stage, and site works for the DMS plant are
under way. It is expected that mining operations will commence on schedule in
the first half of 2004.
Avontuur Mine, Namaqualand, South Africa
With the new DMS at Avontuur fully operational during the period, production
levels increased substantially. Production during the period was 2,900 carats,
an increase of 184% compared to the same period last year. Diamonds produced
continued to be approximately 85% gem quality, with an average size of 0.23
carats per stone. Average prices for gem quality diamonds sold increased 15% to
$126 per carat , in line with price increases in the rough diamond market in
general. Grades from mining areas ranged from 3 to 30carats/100 tonnes.
Exploration activity continued on targets that had been identified by data from
a high resolution airborne electromagnetic survey conducted over the mine.
Drilling on these targets last year had identified a number of promising gravel
deposits with thick, well developed gravel horizons. An additional 1,819 metres
of drilling was carried out over 102 holes on these targets, following which
locations for bulk sampling have now been selected. Bulk sampling of the first
of these targets will be carried out in the next six months.
Oena Mine, Namaqualand, South Africa
Meso gravel mining operations were carried out by the Company at the Oena and
Blokwerf terraces during the period. Production at the Oena terracewas
significantly reduced due to the fact that no mining was carried out by the
Company's contractor, Ruslyn Mining, following a dispute over their failure to
meet a number of commitments under the terms of their contract. The dispute has
not beenresolved to the Company's satisfaction and, as a result, legal
proceedings have been initiated against Ruslyn Mining. The Company is in the
process of identifying another contractor to replace Ruslyn Mining, and is
currently in negotiations with a number of parties. As a result, overall
production at Oena declined 63% during the period, although production from the
Company's own mining operations at Oena increased 30% to 363 carats. Grades
from mining areas continued in line with last year, and ranged from 0.06 to 0.78
carats/100 tonnes, with diamonds produced averaging 1.36 carats per stone.
Among the large stones produced were diamonds of 13.69, 13.1 and 7.81 carats.
With continued shortages of supply at the high end of the diamond market, demand
for Oena production remained strong. The average value of diamonds sold
increased 42% to $1,207 per carat, primarily due to the sale of a small number
of large, high value stones.
Exploration
Groen River Valley, Namaqualand, South Africa
The Groen River Valley project continued to be the primary focus of the
Company's exploration activities 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 major percussion drilling programme was carried out on targets that had been
identified by ground mapping and aerial photo and satellite analysis. Targets
were drilled on five farms in the Groen River Valley, with 98 holes drilled over
a total of 2,203 metres. Preliminary interpretation of the drilling logs and
samples has been carried out for the first of the targets that was drilled, and
indicates the presence of a very significant gravel deposit. As diamonds have
already been recovered from the farm on which this target is located, this
deposit is likely to be diamondiferous, and will be bulk sampled later in the
year. Final interpretation of the drilling logs and samples for all the targets
that were drilled will be completed in the next month. These results will be
announced as soon as they are available.
An application for a prospecting permit for a new area in the Groen River Valley
is still awaiting approval. This new permit will, when granted, double the size
of our land position in the area. It is expected that this permit will be
granted soon, following which drilling and sampling will be carried out on
targets that have already been identified by aerial photo and satellite analysis
of the new area.
We remain confident that the Groen River Valley has the potential to become an
important new alluvial diamond-producing region, particularly given the fact
that the supply shortfall in the rough diamond market is at its greatest at the
large, high quality end of the market, where prices have risen strongly over the
past year. 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.
Mopipi, Botswana
Exploration activity at the Company's Mopipi joint venture project was focused
on preparing for a new field exploration programme, which will commence in the
next quarter. The primary focus of the exploration programme will be to follow
up on a significant new chrome diopside anomaly located last year on a
palaeo-channel in the Mopipi South prospecting license area. A number of
interesting geophysical and satellite features that are located upstream along
this drainage will be targeted during the new field exploration programme.
As work to date on the Mopipi project has covered less than 5% of the 3,000
square kilometers covered by the Company's prospecting licenses, and with the
increasing opportunities available in South Africa, we decided last year to
consider the introduction of a joint venture partner to the project.
Discussions continued with a number of potential joint venture partners during
the period, and an agreement with the Company's preferred joint venture partner
is expected to be concluded shortly.
New Exploration Projects
The Company has lodged prospecting permit applications over a new palaeo river
system in Namaqualand. This system has been proven to be diamondiferous, and
initial satellite and aerial photo interpretation has identified palaeo channels
over a length of more than 10 kilometres. Additional satellite and aerial photo
interpretation carried out last year has identified a significant new target
more than 8 kilometres long. We are still awaiting the issue of these permits,
following which drilling and bulk sampling will be carried out on the targets
that have been identified. The Company hasalso been active on exploration
outside of Namaqualand, and expects to be able to announce details of a
significant new exploration project shortly.
The Diamond Market
The strength in the diamond market continued during the period. De Beers has
reported a 7% rise in rough diamond sales in 2003 to $5.5 billion and a further
major reduction in its stockpile, and have indicated that it expects 2004 to be
another good year for the diamond industry. Global retail sales of diamond
jewelleryincreased 7% in 2003, with the US market, which accounts for 50% of
global retail diamond sales, growing 10% in the second half of the year.
Rough diamond prices rose by about 15% in 2003, with De Beers increasing prices
on three occasions during the year. This trend has continued into 2004, with De
Beers increasing prices by 3% in January and 5% in March. These increases have
been driven by the growing shortfall in rough diamond supply across all segments
of the market. With De Beers'stocks now at minimum working levels, and the
rough diamond supply deficit expected to continue for the next 3-5 years, the
outlook for diamond prices continues to be very positive.
Financial
Although production from Firestone's own mining operations increased during the
period, the dispute with the mining contractor at Oena resulted in overall group
turnover declining 6% to #475,134, although after tax profits rose 22% to
#134,404. In August 2003, the Company completed a share placing with
institutional and other investors to raise approximately #1.88 million net of
expenses. The primary purpose of the fund raising was to finance the
acquisition of, and the redevelopment of mining operations at, the Bonte Koe
Mine.
Profits during the period continued to be affected by the strength of the Rand,
which has had an impact on all mining companies and exporters in South Africa.
The Rand has been one of the top performing currencies in the world over the
past two years, having appreciated by 38% against the US dollar in 2002, by 36%
in 2003, and by 4% so far in 2004.
Outlook
The main priority for the Company for the rest of the financial year is to bring
the Bonte Koe mine into production. Bonte Koe is expected to make a significant
contribution to overall group turnover when it comes into production, and to
become the Company's most profitable operation. Production at the Avontuur Mine
is expected to continue at a substantially higher level than last year.
Significant developments are also expected on the exploration front. The pace
of exploration activity on our existing exploration projects will continue to
increase this year, with the primary focus being on drilling and bulk sampling
at the Groen River Valley, and a new field exploration programme at Mopipi. We
have also increased the allocation of the Company's resources to the
identification of new exploration projects. We intend to exploit the data that
we have on more than fortyyears of diamond exploration in Namaqualand and
elsewhere, to identify new, large scale exploration projects that have the
potential to yield significant reserves of gem quality diamonds. We expect to
be able to announce several new projects as a result of this work in the coming
year.
With the many opportunities that are available to Firestone, and with the
strength in the rough diamond market expected to continue for the next few
years, we remain confident about the Company's long term prospects.
James F. Kenny
Chairman
31 March 2004
FIRESTONE DIAMONDS PLC
UNAUDITED CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE SIX MONTHS TO 31 DECEMBER, 2003
Six months to 31 Six months to 31 Twelve months to 30
December 2003 December 2002 June 2003
(Unaudited) (Unaudited) (Audited)
Turnover 475,134 505,054 1,157,289
Change in stocks of finished goods (7,191) 41,772 691
and in work in progress
Production 467,944 546,826 1,157,980
Other operating income 3,105 13,613 -
Raw materials and consumables (57,853) (15,281) (133,019)
Staff costs (76,597) (70,506) (104,069)
Depreciation and amortisation (57,639) (34,845) (58,652)
Other operating charges (149,479) (290,330) (727,183)
Operating profit 129,481 149,478 135,057
Interest receivable and similar 19,306 18,107 30,071
income
Interest payable and similar (2,446) (163) (2,261)
charges
Profit on ordinary activities 146,341 167,422 162,867
before taxation
Deferred tax on profit on ordinary (11,938) (57,267) (71,520)
activities
Profit on ordinary activities 134,404 110,155 91,347
after taxation
Minority interests (4,357) (13,031) (26,140)
Retained profit for the period 130,047 97,124 65,207
Earnings per share
Basic profit per share 0.3 p. 0.3 p. 0.2 p.
Diluted profit per share 0.3 p. 0.3 p. 0.2 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 2003
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, 2003, on which the report
of the auditors was unqualified and did notcontain a statement under section
237 of the Companies Act 1985, have been filed with Registrar of Companies.
3. Basic earnings per share is based on the weighted average number of
shares in issue for the period of 39,705,115. Diluted earnings per share is
based on the weighted average number of shares in issue for the period plus
potential dilutive ordinary shares arising from share options for the period of
46,458,723.
4. The directors are not declaring a dividend forthe 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
The company news service from the London Stock Exchange
END
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