RNS Number:0898G
Firestone Diamonds PLC
07 December 2004
Firestone Diamonds plc
Preliminary statement of results
for the year ended 30 June, 2004
LONDON: 7 December, 2004 - 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, 2004.
HIGHLIGHTS
General
* After tax profits increased 148% to #161,498
* Rough diamond market very strong; prices increased 30% since the
beginning of 2003
* Share placement in July 2004 raised approximately #1.3 million after
expenses
Bonte Koe Mine, South Africa
* Mine development completed
* First diamonds produced in October
* Production valued at $200 per carat
Avontuur Mine, South Africa
* Production increased 222% to 6,339 carats
* Average price for gem quality production increased 27% to $140 per
carat
Oena Mine, South Africa
* Overall production decreased 54% due to mining contractor dispute
* Production from Company's own operations increased 26% to 903 carats
* Average value of diamonds sold increased 24% to $1,050 per carat
Mopipi, Botswana
* Joint venture signed with De Beers
* Intensive work programme under way
* 51,000 line kilometres of high-resolution geophysical surveys conducted
* 118 targets identified to date; drilling to commence in early 2005
Orapa and Jwaneng, Botswana
* Two new projects acquired post year end
* Joint ventures signed with De Beers
* Extensive work under way at Orapa; 62 targets identified to date
Groen River Valley, South Africa
* Major new gravel deposit discovered
* Drilling and bulk sampling to commence shortly
USA Exploration
* New kimberlite project announced
* Joint venture established with American Diamonds Inc
New projects
* New exploration and mining projects being evaluated
Dear Shareholder,
The past year has seen continued good progress in the growth and development of
Firestone's exploration project portfolio and mining operations.
Exploration Overview
In last year's Chairman's Statement I indicated that we intended to increase the
scale of the Company's exploration activities and to work with joint venture
partners on a selective basis to allow us to finance and accelerate the
development of an expanded portfolio of exploration projects. We have made
significant progress in this regard, having acquired three new kimberlite
exploration projects and having secured joint venture partners for all four of
our kimberlite exploration projects over the past year.
The primary focus of our kimberlite exploration activities was in Botswana,
which is the world's largest producer of diamonds, with annual production of
approximately 30 million carats worth over $2.5 billion. Over the past year we
expanded the area of our Mopipi project, and in June we announced that we had
entered into a joint venture with De Beers over the Mopipi project. We secured
very attractive terms for this joint venture, with De Beers agreeing to finance
and carry out all exploration and evaluation work, up to and including the
completion of bankable feasibility studies on any kimberlites discovered in the
project area, in return for a 61% interest in the project. We are confident
that De Beers will identify the source of the strong kimberlitic indicator
mineral anomalies identified by our work in the Mopipi area.
We have recently acquired two highly prospective new kimberlite exploration
projects in Botswana, one near the Orapa Mine and the other near the Jwaneng
Mine. We announced today that we have signed two new joint venture agreements
with De Beers over these projects, on the same commercial terms as those of the
Mopipi joint venture.
De Beers is currently carrying out an intensive exploration programme in the
Mopipi and Orapa project areas. More than 51,000 line kilometres of
high-resolution geophysical surveys have been conducted, and 180 kimberlite
targets have been selected to date for further investigation. It is expected
that drilling of the first targets will take place in early 2005. De Beers will
also commence work on the Jwaneng project early next year. We believe that the
prospects for the discovery of diamondiferous kimberlite at our projects in
Botswana are very good.
The pace of exploration activity in South Africa has also increased. The Groen
River Valley project in Namaqualand is Firestone's most promising exploration
project in South Africa due to the high quality and large size of diamonds that
have been mined in the area and the large area controlled by the Company.
Exploration drilling carried out during the year in the Groen River Valley
project area resulted in a very significant discovery, and proved the presence
of at least one very large gravel deposit that is known to be diamondiferous.
An intensive exploration and evaluation programme is planned for the area, with
drilling due to begin shortly, and it is expected that this next phase of work
will confirm the economic potential of the area.
In June we also announced a new kimberlite exploration project in the US and the
signing of a joint venture with American Diamonds Inc. over that project.
Mining Operations Overview
Firestone's mining operations play an important role in contributing cash flow
to finance the Company's exploration activities.
The development of our third mining operation at Bonte Koe, which is now in
production, has been the most significant development in this regard over the
past year. Production at the Avontuur Mine increased 222% to 6,339 carats for
the year. The average price for gem quality diamonds sold increased 19% to $131
per carat, and has since risen to $140 per carat as the rough diamond market has
continued to strengthen. Although overall production at the Oena Mine declined
54% due to mining contractor problems, production from the Company's own mining
operations at Oena increased 26% to 903 carats for the year. The average price
for diamonds sold increased 24% to $1,050 per carat, primarily due to the sale
of a number of high value diamonds, including stones of 31.53 and 20.15 carats
that sold for approximately $200,000 and $42,000, respectively.
Turnover from Firestone's own mining operations increased during the year, with
the second half of the year showing an increase of 6% from the first half, but
the mining contractor problems at Oena and the continued strength in the rand
resulted in overall group turnover declining 15% to #978,298. Despite this,
after tax profits rose 148% to #161,498.
As a result of the increased scale of the Company's mining operations we decided
to create the new position of Operations Director. We have appointed Jan Louw
to this position and he will be responsible for managing all aspects of our
mining operations in South Africa. Mr Louw has extensive experience in
planning, developing and managing large scale open cast mining operations,
having worked in senior management positions for Anglo American for 13 years in
South Africa and Namibia.
The Diamond Market
Prices in the rough diamond market increased strongly during the year, driven by
the growing shortfall in rough diamond supply across all segments of the market.
Rough diamond prices have risen by about 30% since the beginning of 2003, and
this has followed through into the polished diamond market, with polished prices
rising 21% so far in 2004.
De Beers reported a 7% rise in rough diamond sales in 2003 to $5.5 billion, and
a 2% increase in sales for the first half of 2004 to $3 billion. De Beers,
which only a few years ago held more than $4 billion worth of diamond stocks, is
facing potentially significant shortages under its demand-driven Supplier of
Choice policy. Earlier this year De Beers indicated that its stocks were at
minimum working levels and that for the first time its sales would be based on
intake, meaning that it would only be able to supply the market on the basis of
new production from its mines and purchases from other producers.
Demand for diamond jewellery has continued to increase, with global retail sales
increasing 7% in 2003, and 7% in the first half of 2004. With continued growth
forecast for retail demand, and the rough diamond supply deficit expected to
continue for at least the next three to five years, the outlook for diamond
prices continues to be very positive.
Outlook
Growth in shareholder value for smaller companies in the natural resources
sector, such as Firestone, is primarily driven by exploration success. We
believe that Firestone's substantial intellectual property assets, with data
from more than forty years of diamond exploration in South Africa and elsewhere,
provide us with a significant competitive advantage, as we can use them to
identify attractive, large scale exploration projects that have the potential to
yield significant reserves of gem quality diamonds.
The progress that we have made over the past year in securing joint ventures
with De Beers over our three Botswana projects, and with American Diamonds Inc.
over our US project, provides a good indication of the Company's ability in this
regard. With these projects now being financed and managed by joint venture
partners, we intend to continue expanding our exploration project portfolio. In
July 2004, the Company completed a share placing, raising approximately #1.3
million net of expenses, for the purpose of accelerating the pace of
acquisition, exploration and development of new projects. We intend to work on
selected projects ourselves and to seek joint venture partners for the remaining
projects. We are currently evaluating a number of new opportunities in South
Africa and elsewhere, and expect to be able to announce the results of this work
in the coming year.
We also intend to continue developing our mining operations in South Africa.
Our main focus in this regard will be on Bonte Koe, which is expected to start
making a significant contribution to group turnover during the second half of
the financial year. We remain concerned about the impact on our mining
operations of further strengthening of the rand, which has been one of the
strongest performing emerging market currencies in the world in the past few
years, having gained almost 140% against the dollar since hitting an all time
low of R13.85 in 2001.
With the many opportunities that are available to Firestone and with the
strength in the rough diamond market expected to continue in the medium term, we
remain confident about the Company's long term prospects. I would like to
record again the Board's appreciation of the continued dedication and commitment
of our senior management and staff, who have contributed to the Company's
continued growth and development over the past year, and who will be critical to
the Company's ability to achieve its objectives for the coming year.
Review of Operations
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
through its black empowerment joint venture company, African Star Minerals.
Development plans for Bonte Koe were prepared with the assistance of independent
consultants, and a contract was awarded at the end of 2003 for the construction
of a 100 tonne per hour dense media separation (DMS) gravel treatment plant.
In early 2004, following a review of exploration potential at Bonte Koe and
other opportunities on the Buffels River, the Company decided to increase the
capacity of the gravel treatment plant by 50% to 150 tonnes per hour. The
Company also decided to upgrade the power and water infrastructure planned for
Bonte Koe, and to construct a 10 km power line and to lay a 35km water pipeline
to the mine. While capital costs were higher and the project schedule was
delayed as a result, operating cost savings are expected to be substantial and
to pay for the additional capital costs during the first two years of operation.
By the end of June, substantial work had been completed on the fabrication of
the gravel treatment plant, establishment of water supply and on the
refurbishment of accommodation, workshop and office facilities. Construction
and certification of the power line was not completed until September, which
then allowed commissioning of the plant to commence, with the first diamonds
being recovered in October. The plant is now operational, although minor
modifications are being made to optimise gravel throughput and diamond recovery
efficiency. While these final modifications are still being made, the plant is
processing tailings and low grade gravels that overlie the main ore body.
Although no sales of diamonds from Bonte Koe have yet taken place, the first
parcel of diamonds from the mine has been valued at $200 per carat, in line with
expectations. We expect that operations will ramp up to target production
levels and that the mine will start making a significant contribution to overall
group production in the second half of the financial year.
Avontuur Mine, Namaqualand, South Africa
The new DMS gravel treatment plant at Avontuur was fully operational during the
year and production levels increased substantially as a result. Production for
the year was 6,339 carats, an increase of 222% compared to last year, and grades
from mining areas ranged from 2 to 30 carats/100 tonnes. Diamonds produced
continued to be approximately 85% gem quality, with an average size of 0.22
carats per stone. The average price for gem quality diamonds sold during the
year increased 19% to $131 per carat, compared to $110 at the end of last year,
and has since risen to $140 per carat as the rough diamond market continued to
strengthen. Some mining equipment from Avontuur has been temporarily allocated
to Bonte Koe, but the impact of this has been reduced by more effective
utilization of other equipment at the mine.
Exploration activity continued on targets that had been identified by data from
a high-resolution airborne electromagnetic survey conducted over the mine. A
total of 1,819 metres of drilling were carried out over 102 holes on selected
targets, following which locations for bulk sampling have been selected. Bulk
sampling of the first of these targets is expected to take place next year.
Oena Mine, Namaqualand, South Africa
Meso gravel mining operations were carried out by the Company at the Oena and
Blokwerf terraces during the year. Overall production at the Oena terrace was
significantly reduced due to the fact that no mining was carried out by the
Company's mining contractor, following a dispute over its failure to meet a
number of commitments under the terms of its contract. The dispute has not
been resolved to the Company's satisfaction and legal proceedings against the
contractor are under way. As a result, overall production at Oena declined 54%
compared to last year, although production from the Company's own mining
operations at Oena increased 26% to 903 carats.
Grades from mining areas continued in line with last year, and ranged from 0.06
to 1 carats/100 tonnes, with diamonds produced averaging 1.23 carats per stone.
With continued shortages of supply at the high end of the diamond market, demand
for Oena production remained strong. The average price for diamonds sold
increased 24% to $1,050 per carat, primarily due to the sale of a number of
large, high value stones. A number of special diamonds were recovered during
the year, including stones of 30.53 and 20.15 carats that sold for approximately
$200,000 and $42,000, respectively.
Exploration
Mopipi, Botswana
Firestone's Mopipi prospecting licences cover an area of approximately 3,650
square kilometers and are located adjacent to De Beers' Orapa and Letlhakane
diamond mines. Firestone has carried out a substantial amount of exploration at
Mopipi over the past seven years. Soil sampling has produced seven micro
diamonds, one white macro diamond weighing 0.07 carats, a large number of G10
garnets and more than fifty chrome diopsides. These results strongly suggest
the presence of a new diamondiferous kimberlite source in the area.
During the year, the Company acquired the interests held in the Mopipi project
by Firestone's previous joint venture partner, NM & BC Exploration Services. In
June 2004, the Company entered into a new joint venture with De Beers over the
Mopipi project, under the terms of which De Beers will finance and carry out all
exploration and evaluation work, up to and including the completion of bankable
feasibility studies on any kimberlites discovered in the joint venture area, in
return for a 61% interest in the joint venture.
De Beers has made significant progress on the Mopipi project since June. A
total of 51,408 line kilometres of high-resolution geophysical surveys,
comprising airborne magnetics, airborne gravity gradiometry, ground magnetics
and ground gravity, have been conducted, covering approximately 95% of the
Mopipi project area. Interpretation of data from the geophysical surveys is
currently under way, and 118 targets have already been selected for further
investigation. These targets are currently being verified on the ground in
preparation for drilling in early 2005.
The economic potential of kimberlites BK31 and BK35, previously discovered by De
Beers, and located in the Mopipi project area close to the Letlhakane diamond
mine, is being re-evaluated. Modeling of high-resolution ground geophysics is
being undertaken in order to establish accurate size estimates for the bodies.
Ground gravity surveys have already been conducted over BK31, and will be
conducted over BK35 in the first quarter of 2005. This information will be used
to determine drilling positions for sampling of the kimberlites to assess their
economic potential.
Groen River Valley, Namaqualand, South Africa
The Groen River Valley project is the Company's most promising exploration
project in South Africa, due to the high quality and large size of diamonds that
have been mined in the area, and the large area controlled by the Company. The
Company is 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.
A major percussion drilling programme was carried out during the year on
selected targets that had been identified by ground mapping and aerial photo and
satellite analysis, and resulted in a very significant discovery. Targets were
drilled in five areas, 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 five targets that was drilled, and indicates the presence
of a very significant gravel deposit (known as the HL deposit). Diamonds have
already been recovered from the property on which this deposit is located,
proving that it is diamondiferous.
An intensive exploration and evaluation programme is planned for the Groen River
Valley area in 2005, and it is expected that this programme will make
significant progress towards confirming the economic potential of the area.
This programme, which is due to begin shortly, will include detailed drilling
and bulk sampling on the HL deposit, follow-up drilling on targets identified by
the previous drilling programme, and drilling of new targets. As the HL deposit
has been proven to be diamondiferous, the objective of the bulk sampling
programme will be to estimate the grade of the deposit and diamond value in
order to make an initial economic evaluation of the deposit.
An application for a prospecting permit for a new area in the Groen River Valley
is awaiting approval. This new permit will, if granted, significantly increase
the size of our land position in the area. It is expected that this permit will
be granted in 2005, 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.
Orapa, Botswana
Since the end of the year, Firestone has been awarded two new prospecting
licences covering an area of approximately 1,300 square kilometers adjoining the
western boundary of the Orapa Mine, and the southern and eastern boundaries of
the nearby Letlhakane Mine. The Company has announced today that De Beers has
entered into a joint venture with Firestone over this project, on the same
commercial terms as those of the Mopipi joint venture.
De Beers will carry out an intensive exploration and evaluation programme in the
Orapa project area. High-resolution geophysical surveys, including airborne
magnetics, ground gravity and ground magnetics, will be conducted over the
entire project area. When data from these surveys has been processed and
interpreted, it will be reviewed along with data from previous kimberlite
indicator mineral sampling in order to select and prioritise potential
kimberlite drilling targets. This work has already commenced, and the initial
geophysical work programme is expected to be completed in the first quarter of
2005. A total of 62 targets have already been identified. Target
identification is expected to be completed during the second quarter of 2005,
following which drilling of selected targets will be carried out.
Jwaneng, Botswana
Since the end of the year, Firestone has been awarded four new prospecting
licences covering an area of approximately 3,700 square kilometers close to the
Jwaneng Mine. The Company has announced today that De Beers has entered into a
joint venture with Firestone over this project, on the same commercial terms as
those of the Mopipi joint venture.
Substantial exploration work has already been carried out by De Beers in the
Jwaneng region, and airborne magnetic data is available for the Jwaneng project
area from surveys carried out by the Botswana Geological Survey. Under the
terms of the Jwaneng joint venture agreement, this data will be used in
conjunction with data from past kimberlite indicator mineral sampling to
identify target areas for follow-up work on the ground. High-resolution ground
gravity and magnetic surveys will be conducted on selected target areas to
identify potential kimberlite drilling targets. This work is expected to
commence in early 2005.
US Exploration Project
A significant amount of exploration has been carried out on the Company's
kimberlite exploration project in the United States. More than 750 stream and
soil samples were taken up to the end of the year. More than one third of these
contained kimberlitic indicator minerals, and microprobe analysis has confirmed
that some of the grains are diamond-associated, including a number of G10's and
diamond-associated chromites. This sampling has identified a number of high
priority target areas with exceptionally high counts of kimberlitic indicator
minerals and significant numbers of chrome diopside, which indicates proximity
to source. The results indicate that at least one previously unknown kimberlite
field is located in the project area, and that some of these kimberlites may be
diamondiferous.
In June 2004, the Company entered into a joint venture over the US project with
American Diamonds Inc. American Diamonds is owned by Dunsmuir Ventures Limited
and Majescor Resources Inc, both Canadian diamond exploration companies and
listed on the TSX Venture Exchange in Canada. Under the terms of the joint
venture, ADI can earn a 60% interest in the project through the expenditure of
$1 million. Follow-up sampling is under way in the high priority target areas,
and results will be announced once this work has been completed.
James F. Kenny
Chairman
6 December 2004
FIRESTONE DIAMONDS PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 30 JUNE 2004
2004 2003
# #
Production 961,435 1,157,980
-------- ---------
Turnover 978,298 1,157,289
Change in stocks of finished goods (16,863) 691
and in work in progress -------- ---------
Raw materials and consumables (142,634) (133,019)
Staff costs (158,871) (104,069)
Depreciation and amortisation (124,925) (58,652)
Other operating charges (428,256) (727,183)
_______ ________
Operating profit 106,749 135,057
Profit on disposal of fixed assets 43,857 -
_______ ________
Profit on ordinary operating activities before 150,606 135,057
interest and taxation
Interest receivable and similar income 28,311 30,071
Interest payable and similar charges (4,958) (2,261)
_______ ________
Profit on ordinary activities before taxation 173,959 162,867
Tax on profit on ordinary activities (17,480) (71,520)
_______ ________
Profit on ordinary activities after taxation 156,479 91,347
Minority interests 5,019 (26,140)
_______ ________
Retained profit for the year 161,498 65,207
_______ ________
Earnings per share
Basic earnings per share 0.4p 0.2p
Diluted earnings per share 0.4p 0.2p
_______ ________
Turnover is wholly derived from continuing activities.
CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
FOR THE YEAR ENDED 30 JUNE 2004
# #
Profit for the financial year 161,498 65,207
Currency translation differences 113,782 168,171
_______ ________
Total recognised gains and losses for the year 275,280 233,378
_______ ________
FIRESTONE DIAMONDS PLC
CONSOLIDATED BALANCE SHEET
30 JUNE 2004
2004 2003
# # # #
FIXED ASSETS
Intangible assets 10,746,075 9,028,912
Tangible assets 3,307,431 1,844,402
Investments 609,351 378,275
___________ ___________
14,662,857 11,251,589
CURRENT ASSETS
Stocks 121,063 128,754
Debtors 478,649 250,736
Cash at bank and in hand 293,934 273,636
___________ ___________
893,646 653,126
CREDITORS
Amounts falling due within
one year (684,894) (618,283)
___________ ___________
NET CURRENT ASSETS 208,752 34,843
___________ ___________
TOTAL ASSETS LESS CURRENT
LIABILITIES 14,871,609 11,286,432
CREDITORS
Amounts falling due
after one year (1,010,976) (193,638)
PROVISIONS FOR LIABILITIES
AND CHARGES
Other provisions (877,110) (564,852)
Deferred taxation (469,013) (403,574)
___________ ___________
(1,346,123) (968,426)
___________ ___________
NET ASSETS 12,514,510 10,124,368
___________ ___________
CAPITAL AND RESERVES
Called up share capital 8,193,094 6,840,094
Share premium account 4,415,004 3,648,123
Merger reserve (1,076,399) (1,076,399)
Profit and loss account 984,165 708,885
___________ ___________
EQUITY SHAREHOLDERS' FUNDS 12,515,864 10,120,703
Minority equity interests (1,354) 3,665
___________ ___________
12,514,510 10,124,368
___________ ___________
Approved by the Board on 6 December, 2004
P Kenny
Director
FIRESTONE DIAMONDS PLC
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 30 JUNE 2004
2004 2003
# # # #
Net cash (outflow)/inflow
from operating
activities (149,154) 576,399
Returns on investments and
servicing of finance
Interest received 28,311 30,071
Interest element of
finance lease payments (4,958) (2,261)
___________ ___________
Net cash inflow from returns on
investments and servicing of
finance 23,353 27,810
Capital expenditure and
financial investment
Payments to acquire
intangible fixed assets (1,501,683) (1,624,597)
Payments to acquire
tangible fixed assets (1,019,076) (62,653)
Receipts from sales of
tangible fixed assets 110,885 -
Payments to acquire
investments (231,076) (93,013)
___________ ___________
Net cash outflow from
capital expenditure
and financial investment (2,640,950) (1,780,263)
___________ ___________
Net cash outflow before use of
liquid resources and financing (2,766,751) (1,176,054)
Financing
New long term loans 877,948 -
Issue of ordinary share
capital 2,119,881 -
Finance lease payments (228,716) (40,378)
___________ ___________
2,769,113 (40,378)
___________ ___________
Increase/(decrease) in cash 2,362 (1,216,432)
___________ ___________
Notes to the preliminary statement of results for the year ended 30 June 2004
1. Basis of preparation
The financial statements have been prepared in accordance with applicable UK
accounting standards and under the historical cost convention.
2. Earnings per share
Basic earnings per share is based on a profit of #161,498 (2003: #65,207) and a
weighted average number of shares in issue of 39,853,921 (2003: 34,200,469).
Diluted earnings per share is based on a profit of #161,498 (2003: #65,207).
The weighted average number of shares used to calculate diluted earnings per
share incorporates the weighted average number of shares in issue of 39,853,921
(2003: 34,200,469) plus dilutive potential ordinary shares arising from share
options of 2,375,709 (2003: 4,884,679) totalling 42,229,630 (2003: 39,085,148).
3. Publication of non-statutory accounts
The figures for the year ended 30 June 2003 are based on the audited accounts
for that year, which have been delivered to the Registrar of Companies and on
which the auditors gave an unqualified report. The financial statements for the
year ended 30 June 2004, which have been prepared using the same accounting
policies as in 2003, have been completed and the auditors anticipate issuing an
unqualified audit opinion thereon. The financial information set out above does
not constitute statutory accounts as defined in section 240 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. Annual General Meeting
The company's Annual General Meeting will be held at MWB Business Exchange, 78
Cannon Street, Fourth Floor, London EC4N 6NQ on 31 January, 2005 at 12.00 p.m.
5. Dividends
The directors do not recommend the payment of a dividend for the period.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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