TIDMDCP
RNS Number : 4936E
Diamondcorp Plc
13 May 2013
13 May 2013
DiamondCorp plc
JSE share code: DMC & AIM share code: DCP
ISIN: GB00B183ZC46
(Incorporated in England and Wales)
(Registration number 05400982)
(SA company registration number 2007/031444/10)
("DiamondCorp", "the Group" or "the Company")
Final Results for the year ended 31 December 2012
Highlights
-- Net loss reduced from GBP4,239,146 for 2011 to GBP3,534,940 for 2012.
-- Cash at year end GBP4,319,776.
-- Further US$6 million (GBP4.2 million) in term loan funds received from Tiffany & Co.
subsidiary Laurelton Diamonds since year end.
-- IDC Loan R220 million (GBP15.7 million) available for drawn down when required in Q3 2013.
-- Progress on box cut and ramp development on schedule and within budget.
DiamondCorp plc, the African diamond mining and exploration
company, releases its audited results for the year ended 31
December 2012. The Company's Annual Report and Accounts and Notice
of Annual General Meeting will be posted to shareholders on 7 June
2013 and will be available on the Company's website
(www.diamondcorp.plc.uk).
Contact details:
DiamondCorp Plc Joint Broker
Paul Loudon, Chief Executive SP Angel Corporate Finance
Euan Worthington, Chairman LLP
Tel: +44 20 3151 0970 Ewan Leggat/Laura Littley
+27 56 212 2930 Tel: +44 207 598 5368
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UK Broker & Nomad JSE Sponsor
Panmure Gordon (UK) Limited PSG Capital (Pty) Limited
Dominic Morley/Adam James John-Paul Dicks
Tel: +44 20 7886 2500 Tel: +27 21 887 9602
------------------------------ ----------------------------
LETTER FROM THE CHAIRMAN AND CHIEF EXECUTIVE
Dear Shareholder
We are very pleased and proud to have completed a financing
package for development of the first block cave at the Lace Mine.
We achieved this success during 2012 in the toughest market
conditions that we have experienced in our careers and have done it
with minimal dilution for existing shareholders.
The results from an underground bulk sample completed in Q4 2011
were sufficiently positive for our advisors to recommend that the
Company proceed to a full engineering study on an underground mine.
We appointed SRK Consulting (South Africa) (Pty) Ltd., ("SRK") to
produce an independent report which was completed in March 2012 and
recommended that we initiate mining with a block cave on the 47
Level (-470m below surface).
European banks remained uninterested in anything but the most
secure lowest risk mining project but after reviewing the SRK
report, a number of South African banks showed enthusiasm for the
provision of debt finance to develop the Lace Mine and your Board
deemed that the most attractive proposal received was from the
Industrial Development Corporation of South Africa ("IDC").
Lace Mine financing package
In May last year, we received a draft Terms Sheet indicating
that the IDC would lend Lace Diamond Mines ("Lace"), our 74% owned
operating subsidiary, R280 million (US$33.6 million) for
underground mine development and the purchase of mining equipment.
The IDC's lengthy due diligence, financial modelling and risk
assessment process regrettably coincided with worsening world
economic conditions exacerbated by the Greek debt crisis. As a
consequence, it was agreed that the IDC would lend Lace R220
million (US$26.7 million), representing approximately 77% of the
estimated R285 million peak funding requirement for the 47 Level
block cave development, including new underground ramps, crusher
and conveyor system. This sum estimated by the Company`s engineers
and consultants included a 15% contingency.
For its part, DiamondCorp agreed to arrange additional funding
of R100 million to be advanced to Lace prior to the initial
drawdown of the IDC debt facility, meaning a total R320 million
funding package would be provided, including a 33% contingency on
the Company`s forecast capital budget. The principal amount of the
loan and initial drawdown condition differed from the original IDC
Terms Sheet after the parties agreed that increasing the total
amount available for the project would be prudent in the light of
challenging macroeconomic conditions and rand volatility which has
a potential major impact on capital and input costs, particularly
diesel, steel, tyres and conveyor belting. In other respects, the
major commercial terms of the loan remained unchanged.
The IDC loan is secured over the assets of Lace and guaranteed
by DiamondCorp plc. The term of the loan is 7 years with an
interest rate of 2% above the South African Prime Lending Rate
(which is currently 8.5%), such interest to be capitalised for the
first two years from the initial drawdown date, which can be
anytime up to 31 July 2014. We anticipate initial drawdown will be
in Q3 this year and interest will be calculated semi-annually in
arrears thereafter, with a two year moratorium on loan repayments
from the first drawdown date.
To raise the additional R100 million we appointed Rand Merchant
Bank and PSG Capital as advisors and arrangers in South Africa to
raise up to R150 million through an issue of convertible bonds.
There was a good response to marketing these bonds but as potential
investors carried out their due diligence, strikes at the South
African platinum mines culminated in the shooting of rioters at
Marikana, a platinum mine owned by Lonmin Plc, in August 2012.
Unsurprisingly, this sad event caused many institutions to withdraw
their interest in any mining company investment and only R40
million of bonds were placed in SA, conditional on the balance of
funds being raised elsewhere.
We turned to the London capital markets to fill the gap, but
with the fallout from the European banking crisis combined with
intense media coverage of events on the South African platinum
mines, sentiment in the UK was not much better. However, supported
by core investments some of our largest shareholders, we succeeded
in placing GBP1.0 million of new equity and a further GBP1.4
million of convertible bonds, which are parallel in most respects
to the South African instrument.
While we were in the process of finalising documentation for the
bond issue, Laurelton Diamonds Inc., a wholly owned subsidiary of
leading jewellery firm Tiffany & Co., heard that we were close
to financing Lace. Earlier in the year, Laurelton had shown strong
interest in the Lace product, visited the mine and viewed the bulk
sample. Negotiations led to an offer of US$6 million as a term loan
from Laurelton in exchange for the right to purchase, on commercial
terms related to fair market value, diamond production from the
Lace Mine. The Off-take Agreement is subject to any purchases by
the South African State Diamond Trader and will be for stones which
meet the high quality and colour characteristics required to yield
Tiffany-standard polished diamonds. Larger (over 10.5 carats) and
special stones (any diamond worth more than $5,000 per carat) are
excluded from the Off-take Agreement. The balance of production
that Tiffany does not purchase will be marketed by the Company in
Johannesburg and Antwerp at regular intervals.
Together, the convertible bonds, the new equity and the
Laurelton loan total some R113 million, most of which has been
advanced to Lace to satisfy the initial drawdown condition of the
IDC loan.
Lace Mine development schedule
The finance package was finalised in the first week of January
2013 with the signing of the Laurelton loan, allowing underground
development to resume in earnest at Lace. Over the next 12 months,
the following development is planned:
-- Excavation of 66,500 cubic metres of surface material to
establish a boxcut and new life of mine access ramp and portal into
the underground workings.
-- Drilling and blasting of a 50m vent raise to by-pass a
blockage in the old vertical shaft and provide sufficient temporary
ventilation so that underground development can be undertaken to
the 470m level.
-- Drilling and blasting of approximately 3,000m of underground
tunnelling comprising a 4.5m x 4.5m men and materials access
decline alongside a 5m x 3m conveyor belt decline at 12
degrees.
-- Approximately 2,000m of underground core drilling of the
"bulge" area on the south-east side of the main pipe to define the
extent of additional kimberlite which might be available for mining
ahead of the block cave.
-- Design, fabrication and installation of approximately 1,000m
of conveyor belting. This conveyor will ultimately extend to the
underground crushing chamber below the 47 level block cave and
provide kimberlite feed for the plant.
-- Refurbishment of the 1.2 million tpa Lace processing plant,
including essential modifications to allow the transition from
treating tailings to treating underground kimberlite during
2014.
The underground development is being undertaken by the Company's
own mining teams using our fleet of 9.5-tonne low profile loaders,
20-tonne low profile dump trucks and face drilling rigs. The
experience that the Company gained during bulk sampling has
demonstrated that considerable time and financial savings can be
achieved with this approach as we are too small to demand the best
rates and equipment from contractors. We also understand that
equipment availability is critical to high-speed underground
development and have concentrated on building up a core competency
in rebuilding our heavy equipment on-site to ensure our mining
fleet gives us the performance we require. This approach
underscores our long-term commitment to underground mining and has
allowed us to attract some high-calibre personnel with many years
of experience in underground kimberlite mining.
Diamond prices
Diamonds are raw materials in luxury goods manufacturing and
diamond prices are therefore a reflection of the health of the
world economy. World markets remain volatile and demand for luxury
goods has been dampened as a consequence. Nonetheless, diamond
prices appear to have stabilised in the first few months of 2013,
and market indicators look like we are starting to see early signs
of recovery in the US which remains the world's biggest market for
diamonds. Diamond prices are expected to remain volatile until such
time as a sustained economic recovery is achieved.
The Company intends re-commissioning the Lace plant before the
middle of 2013 with kimberlite tailings and we will then test the
market in the second half of the year with sales of the diamonds we
recover. Depending on the prices achieved, the Company will assess
if it is worth increasing tailings production ahead of kimberlite
being mined from underground in 2014.
Company strategy
It is very tempting for us to focus solely on the development of
the Lace Mine which by any account is one of the most attractive
diamond projects in the world today. However, it is your Board`s
view that there are risks to being a one mine company and that with
the skilled management team in place, we should be looking for
other assets.
In recent years, we have been offered diamond projects around
the world but nothing has offered the financial returns or upside
potential we consider necessary to be value accretive for
shareholders and warrant the management attention required. We do
not see value in most alluvial projects where it is difficult to
budget or plan ahead and we are not prepared to take the risk of
operating in the Democratic Republic of Congo or Angola at this
time. We believe that the high level of risk of grassroots
exploration is not what our shareholders want and diversifying too
far afield stretches the budget of a small company. DiamondCorp`s
skills are in underground mining of kimberlites to which we can add
the ability to find finance in the harshest market conditions.
Therefore, we will continue to look at new opportunities but you
can be assured that they will only be in the diamond sector and
that our due diligence and risk assessment process will remain
intense while we will call on input from all our employees,
directors and consultants.
In conclusion
In our statement a year ago, we wrote about the good and bad
luck that had come our way. This roller-coaster theme continued in
2012 but thanks to everyone`s perseverance, enthusiasm and support,
we are now on the way to developing the 47 Level block cave at
Lace. Once established, this should provide production for at least
the next seven years, while subsequent block caves planned for the
670 and 850m levels will allow us to access the currently defined
mine resource of 13.3 million carats over the next 25 years. With
the pipe open at depth, Lace should operate for longer than
this.
Our success would not have been possible without the great team
we have in place at DiamondCorp and while thanking everyone in the
Company and our consultants, we would like to single out Steve
West, Chief Operating Officer and Andre Labuschagne, the new Lace
Mine manager who maintained the morale of the workforce at the mine
during a testing year.
We have been humbled by everyone`s efforts to secure development
of the Lace Mine and, although a lot of hard work remains to be
done, we look forward to an exciting future for Lace and the
Company.
Euan Worthington - Chairman
Paul Loudon - Chief Executive
CONSOLIDATED INCOME STATEMENT
Year ended 31 December 2012
2012 2011
Note GBP GBP
Depreciation and amortisation (669,656) (918,291)
Other administrative expenses (2,401,520) (2,042,690)
Total administrative expenses (3,071,176) (2,960,981)
Gain on insurance settlement - 2,195,816
Other income - 11,048
Write off of tailings inventory (275,561) -
Impairment of intangible asset - (2,373,616)
Write off of Botswana project - (1,013,032)
OPERATING LOSS 3 (3,346,737) (4,140,765)
Investment revenues 25,586 24,685
Finance costs (137,707) (123,066)
Fair value movement on convertible bonds 16 (44,821) -
Effective interest cost on convertible bonds 16 (31,261) -
LOSS BEFORE TAX (3,534,940) (4,239,146)
Tax 6 - -
LOSS FOR THE FINANCIAL YEAR (3,534,940) (4,239,146)
ATTRIBUTABLE TO:
Equity holders of the parent (3,016,615) (3,823,586)
Non controlling interest 23 (518,325) (415,560)
(3,534,940) (4,239,146)
BASIC AND DILUTED LOSS PER SHARE 7 (1.22p) (1.87p)
HEADLINE LOSS PER SHARE* 7 (1.22p) (2.43p)
All of the activities of the Group are classed as
continuing.
* The Group presents an alternative measure of loss per share
after excluding all capital gains and losses from the loss for the
financial year (see note 7).
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME AND EXPENSE
Year ended 31 December 2012
2012 2011
GBP GBP
Net loss (3,534,940) (4,239,146)
Foreign exchange on translation of overseas
operations (1,046,352) (2,443,288)
Total comprehensive expense (4,581,292) (6,682,434)
ATTRIBUTABLE TO:
Equity holders of the parent (4,165,241) (6,405,668)
Non controlling interest (416,051) (276,766)
(4,581,292) (6,682,434)
COMPANY INCOME STATEMENT
Year ended 31 December 2012
2012 2011
Note GBP GBP
Administrative expenses (927,437) (943,158)
Write off of loan to Botswana Diamondcorp
Limited - (1,021,402)
OPERATING LOSS 3 (927,437) (1,964,560)
Investment revenues 315 5,494
Finance costs (78,019) (123,066)
Fair value movement on convertible bonds 16 (26,226) -
Effective interest cost of convertible bonds 16 (8,410) -
LOSS FOR THE FINANCIAL YEAR (1,039,777) (2,082,132)
ATTRIBUTABLE TO THE EQUITY HOLDERS OF THE
PARENT (1,039,777) (2,082,132)
All of the activities of the Company are classed as
continuing.
There were no other gains or losses during the year.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
31 December 2012
2012 2011
Note GBP GBP
NON-CURRENT ASSETS
Goodwill 8 4,606,026 4,606,026
Other intangible assets 8 - 4,641,801
Property, plant and equipment 9 8,776,273 4,609,284
13,382,299 13,857,111
CURRENT ASSETS
Inventories 11 297,474 442,433
Other receivables 12 195,028 182,350
Cash and cash equivalents 13 4,319,776 2,632,760
4,812,278 3,257,543
TOTAL ASSETS 18,194,577 17,114,654
CURRENT LIABILITIES
Other payables 14 (765,501) (498,876)
Other current borrowings 14/20 (68,485) -
Convertible bond notes payable 16 (2,642,739) -
Derivative financial instruments 17 (1,525,391) -
Provisions (119,745) (13,941)
(5,121,861) (512,817)
NET ASSETS 13,072,716 16,601,837
EQUITY
Share capital 21 8,125,184 7,268,041
Share premium account 26,795,360 26,702,502
Warrant reserve 22 92,000 505,877
Share option reserve 439,236 429,066
Translation reserve (750,150) 398,476
Retained losses (20,524,660) (18,013,922)
Equity attributable to equity
holders of the parent 14,176,970 17,290,040
Non controlling interest 23 (1,104,254) (688,203)
TOTAL EQUITY 13,072,716 16,601,837
The financial statements of DiamondCorp plc, registered number
5400982, were approved by the Board of Directors and authorised for
issue on 10 May 2013.
Signed on behalf of the Board of Directors
E A Worthington
Director
COMPANY BALANCE SHEET
31 December 2012
2012 2011
Note GBP GBP
NON-CURRENT ASSETS
Investments in subsidiaries 10 4,672,501 4,217,501
Property plant and equipment 9 297,258 317,075
4,969,759 4,534,576
CURRENT ASSETS
----------- -----------
Other receivables 12 23,446,133 22,835,064
Cash and cash equivalents 13 1,363,545 257,042
24,809,678 23,092,106
TOTAL ASSETS 29,779,437 27,626,682
CURRENT LIABILITIES
Other payables 14 (413,597) (118,580)
Other current borrowings 14/20 (68,485) -
Financial guarantee contracts 16 (455,000) -
Convertible bond notes payable 16 (780,261) -
Derivative financial instruments 17 (541,598) -
(2,258,941) (118,580)
NET ASSETS 27,520,496 27,508,102
EQUITY
Share capital 21 8,125,184 7,268,041
Share premium account 26,795,360 26,702,502
Warrant reserve 22 92,000 505,877
Share option reserve 439,236 429,066
Retained losses (7,931,284) (7,397,384)
TOTAL EQUITY 27,520,496 27,508,102
The financial statements of DiamondCorp plc, registered number
5400982, were approved by the Board of Directors and authorised for
issue on 10 May 2013.
Signed on behalf of the Board of Directors
E A Worthington
Director
STATEMENT OF CHANGES IN EQUITY
Year ended 31 December 2012
Share Share Warrant Share Translation Retained Sub-total Non
capital premium reserve option reserve losses GBP controlling
GBP account GBP reserve GBP GBP interest Total
GBP GBP GBP GBP
GROUP
Balance at 1
January 2011 5,516,209 23,203,016 505,877 402,583 2,980,558 (14,190,336) 18,417,907 (411,437) 18,006,470
Loss for
financial
year - - - - - (3,823,586) (3,823,586) (415,560) (4,239,146)
Other
comprehensive
income - - - - (2,582,082) - (2,582,082) 138,794 (2,443,288)
Total
comprehensive
income - - - - (2,582,082) (3,823,586) (6,405,668) (276,766) (6,682,434)
Issue of share
capital 1,751,832 3,785,440 - - - - 5,537,272 - 5,537,272
Issue costs - (285,954) - - - - (285,954) - (285,954)
Value
attributed
for equity
settled
share based
payments - - 26,483 - - 26,483 - 26,483
Balance at 31
December 2011 7,268,041 26,702,502 505,877 429,066 398,476 (18,013,922) 17,290,040 (688,203) 16,601,837
Balance at 1
January 2012 7,268,041 26,702,502 505,877 429,066 398,476 (18,013,922) 17,290,040 (688,203) 16,601,837
Loss for
financial
year - - - - - (3,016,615) (3,016,615) (518,325) (3,534,940)
Other
comprehensive
income - - - - (1,148,626) - (1,148,626) 102,274 (1,046,352)
Total
comprehensive
income - - - - (1,148,626) (3,016,615) (4,165,241) (416,051) (4,581,292)
Issue of share
capital 857,143 142,857 - - - - 1,000,000 - 1,000,000
Issue costs - (49,999) - - - - (49,999) - (49,999)
Warrants
granted - - 92,000 - - - 92,000 - 92,000
Expiry of
warrants - - (505,877) 505,877 - - -
Value
attributed
for equity
settled
share based
payments - - - 10,170 - - 10,170 - 10,170
Balance at 31
December 2012 8,125,184 26,795,360 92,000 439,236 (750,150) (20,524,660) 14,176,970 (1,104,254) 13,072,716
STATEMENT OF CHANGES IN EQUITY
Year ended 31 December 2012
Share capital Share premium Warrant Share option Retained Total
GBP account reserve reserve losses GBP
GBP GBP GBP GBP
COMPANY
Balance at 1 January 2011 5,516,209 23,203,016 505,877 402,583 (5,315,252) 24,312,433
Loss for financial year - - - - (2,082,132) (2,082,132)
Total comprehensive income - - - - (2,082,132) (2,082,132)
Issue of share capital 1,751,832 3,785,440 - - - 5,537,272
Issue costs - (285,954) - - - (285,954)
Value attributed for equity settled
share
based payments - - - 26,483 - 26,483
Balance at 31 December 2011 7,268,041 26,702,502 505,877 429,066 (7,397,384) 27,508,102
Balance at 1 January 2012 7,268,041 26,702,502 505,877 429,066 (7,397,384) 27,508,102
Loss for financial year - - - - (1,039,777) (1,039,777)
Total comprehensive income - - - - (1,039,777) (1,039,777)
Issue of share capital 857,143 142,857 - - - 1,000,000
Issue costs - (49,999) - - - (49,999)
Warrants granted - - 92,000 - - 92,000
Expiry of warrants - - (505,877) - 505,877 -
Value attributed for equity settled
share
based payments - - - 10,170 - 10,170
Balance at 31 December 2012 8,125,184 26,795,360 92,000 439,236 (7,931,284) 27,520,496
CONSOLIDATED CASH FLOW STATEMENT
Year ended 31 December 2012
2012 2011
GBP GBP
Operating loss (3,346,737) (4,140,765)
Depreciation and amortisation 669,656 918,291
Share based payment charge 10,170 26,483
Warrants granted 92,000 -
Gain on disposal of property plant and equipment - (1,985)
Write off of tailings inventory 275,561 -
Impairment of intangible asset - 2,373,616
Write off of Botswana project - 1,013,032
(Increase) decrease in other receivables (12,675) 215,916
Increase in inventories (140,443) (87,084)
Increase (decrease) in other payables 266,625 (156,668)
NET CASH (USED IN) FROM OPERATING ACTIVITIES (2,185,843) 160,836
INVESTING ACTIVITIES
Purchase of intangible assets - (3,996,606)
Purchase of property, plant and equipment (850,034) (376,794)
Disposal of property, plant and equipment - 74,265
Investment revenues 25,586 24,685
NET CASH USED IN INVESTING ACTIVITIES (824,448) (4,274,450)
FINANCING ACTIVITIES
Repayment of borrowings - (2,308,016)
Net director loan received 50,000 -
Proceeds on issue of convertible bonds, net of
issue costs 3,911,944 -
Proceeds on issue of ordinary shares, net of issue
costs 950,001 5,251,318
NET CASH FROM FINANCING ACTIVITIES 4,911,945 2,943,302
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,901,654 (1,170,312)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 2,632,760 4,293,185
Effect of foreign exchange rate changes (214,638) (490,113)
CASH AND CASH EQUIVALENTS AT END OF YEAR 4,319,776 2,632,760
As outlined in note 13 to the financial statements, GBP4.1
million of the cash and cash equivalents held by the Group at 31
December 2012 was restricted.
COMPANY CASH FLOW STATEMENT
Year ended 31 December 2012
2012 2011
GBP GBP
Operating loss (927,437) (1,964,560)
Depreciation 19,817 19,817
Share option expense 10,170 26,483
Warrants granted 92,000 -
Write off of loan to Botswana Diamondcorp Limited - (1,021,402)
Increase in other receivables (611,069) (3,717,442)
Increase (decrease) in other payables and other
current borrowings 306,211 (49,431)
NET CASH USED IN OPERATING ACTIVITIES (1,110,308) (6,706,535)
INVESTING ACTIVITIES
Investment revenues 315 5,494
NET CASH FROM INVESTING ACTIVITIES 315 5,494
FINANCING ACTIVITIES
Repayment of borrowings - (2,308,016)
Net director loan received 50,000 -
Proceeds on issue of convertible bonds 1,216,495 -
Proceeds on issue of ordinary shares 950,001 5,251,318
NET CASH FROM FINANCING ACTIVITIES 2,216,496 2,943,302
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,106,503 (3,757,739)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 257,042 4,014,781
CASH AND CASH EQUIVALENTS AT END OF YEAR 1,363,545 257,042
As outlined in note 13 to the financial statements, GBP1.2
million of the cash and cash equivalents held by the Company at 31
December 2012 was restricted.
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2012
1. BASIS OF PREPARATION AND ACCOUNTING POLICIES
General information
DiamondCorp plc is a Company incorporated in England and Wales
under the Companies Act 2006 and incorporated as an external
company in South Africa under the Companies Act No 71 of 2008. The
address of the registered office is given on page 1. The nature of
the Group's operations and its principal activities are set out in
the Directors' Report on page 7.
These financial statements are presented in pounds sterling
because that is the functional currency of the parent Company of
the Group. Foreign operations are included in accordance with the
policies set out in this note.
a) Adoption of new and revised International Financial Reporting Standards
The following new and revised Standards and Interpretations have
been adopted in the current year. Their adoption has not had any
significant impact on the amounts reported in these financial
statements, but may impact the accounting for future transactions
and arrangements.
Amendments to IFRS 7 Financial The Group has applied the amendments
instruments:Disclosures to IFRS 7 titled Disclosures - Transfers
of Financial Assets in the current year.
The amendments increase the disclosure
requirements for transactions involving
the transfer of financial assets in
order to provide greater transparency
around risk exposures when financial
assets are transferred.
Amendments to IAS 12 Income taxes The Group has applied the amendments
to IAS 12 (December 2010) titled Deferred
tax: Recovery of underlying assets.
The amendments provide a practical approach
for measuring deferred tax liabilities
and deferred tax assets when investment
property is measured using the fair
value model in IAS 40 Investment Property.
The amendments introduce a presumption
that an investment property is recovered
entirely through sale. This presumption
is rebutted if the investment property
is held within a business model whose
objective is to consume substantially
all of the economic benefits embodied
in the investment property over time,
rather than through sale.
At the date of authorisation of these financial statements, the
following Standards and Interpretations which have not been applied
in these financial statements were in issue but not yet effective
(and in some cases had not yet been adopted by the EU):
IFRS 1 (amended) Government Loans
IFRS 7 (amended) Disclosures - Offsetting Financial Assets and
Financial Liabilities
Annual Improvements to IFRSs (2009 - 2011) Cycle
IFRS 9 Financial Instruments
IFRS 10 Consolidated Financial Statements
IFRS 10, IFRS 12 and IAS 27 Investment entities (amended)
IFRS 11 Joint Arrangements
IFRS 12 Disclosure of Interests in Other Entities
IFRS 13 Fair Value Measurement
IAS 27 (revised) Separate Financial Statements
IAS 28 (revised) Investments in Associates and Joint
Ventures
IAS 32 (amended) Offsetting Financial Assets and Financial
Liabilities
IFRIC 20 Stripping Costs in the Production Phase of a Surface
Mine
The directors do not expect that the adoption of the standards
listed above will have a material impact on the financial
statements of the Group in future periods, except as follows:
-- IFRS 7 (amended) will increase the disclosure requirements
where netting arrangements are in place for financial assets and
financial liabilities;
-- IFRS 9 will impact both the measurement and disclosures of Financial Instruments;
-- IFRS 12 will impact the disclosure of interests DiamondCorp plc has in other entities; and
-- IFRS 13 will impact the measurement of fair value for certain
assets and liabilities as well as the associated disclosures.
b) Statement of compliance
The consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards
(IFRSs). The financial statements have also been prepared in
accordance with IFRSs adopted by the European Union and therefore
the Group financial statements comply with Article 4 of the EU IAS
Regulation.
c) Basis of preparation
The financial statements have been prepared on the historical
cost basis, except for certain financial instruments that are
measured at fair value, as explained in the accounting policies
below. Historical cost is generally based on fair value of the
consideration given in exchange for assets. The financial
statements have been prepared on a going concern basis. The
principal accounting policies adopted are set out below.
d) Going Concern
In determining the appropriate basis of presentation of the
financial statements, the Directors are required to consider
whether the Group can continue in operational existence for the
foreseeable future, this being a period of not less than 12 months
from the date of the approval of the financial statements. The
Group's business activities and goals are set out in the Letter
from the Chairman and Chief Executive.
As at 31 December 2012 the group had drawn down GBP4.3 million
relating to the UK and South African convertible bonds, giving a
cash balance of GBP4.3 million.
As set out in note 16, the UK and South African convertible
bonds are currently legally repayable on demand in cash, for an
amount equal to the value of shares calculated under the conversion
formula. The current Group share price of 4.3 pence is 35% lower
than the share price required, if the convertible bonds are called,
for the full repayment of the original principal amount of the UK
and South African convertible bonds.
Only once a special resolution is passed at a general meeting of
shareholders, will the Group then have the option of settling the
debt, if called, through the issue of a fixed amount of shares. The
directors plan to propose the necessary special resolution at the
Annual General Meeting ("AGM"), scheduled for July 2013. Whilst the
directors remain confident that the special resolution will be
passed at the AGM and the holders will not seek early redemption of
the convertible bonds prior to the AGM, if this were to take place
the Group may have insufficient unrestricted cash to meet any
amounts due which would be proportionate to the share price of the
group. After making an assessment of the likelihood of the
convertible bonds being called prior to the special resolution
being obtained and the Group's cash flow forecasts, the Directors
have a reasonable expectation that the Group will continue to have
sufficient funds available to meet any financial obligations in
respect of the convertible bonds.
Post year end the Group signed and on 10 April 2013 drew down
the final tranche of the $6 million (GBP4 million) Laurelton loan.
Following this, the Group has secured the full R100 million of
additional funding required as a condition precedent for the
drawdown of the R220 million (GBP15.7 million) IDC loan facility.
Subject to the successful completion of a number of remaining
procedural conditions precedent, management is confident the Group
will be able to drawdown on the IDC loan facility in the near
future. As at 19 April 2013 the Group had a cash balance of GBP5.6
million, which combined with the undrawn IDC loan facility,
provides full funding for the development of the Lace mine. The
funding from the above convertible bonds and loans are restricted
solely for that use.
While all of the necessary finance for the development of the
Lace mine has been secured, the restricted nature of those funds
means the Company has insufficient cash to cover its corporate
costs and will have to supplement its cash resources by accessing
the equity markets in the imminent future.
The requirement for the Company to raise additional equity funds
in the imminent future indicates the existence of a material
uncertainty which may cast significant doubt about the Company's
ability to continue as a going concern. After making an assessment
of the Group's ability to raise further equity funds, given the
successful fundraisings in the current and prior years, the
Directors have a reasonable expectation that the Group can raise
additional equity funds as required and therefore they continue to
adopt the going concern basis of preparation in the financial
statements.
e) Basis of consolidation
The consolidated financial statements incorporate the financial
statements of the Company and entities controlled by the Company
(its subsidiaries). Control is achieved where the Company has the
power to govern the financial and operating policies of an investee
entity so as to obtain benefits from its activities.
Income and expenses of subsidiaries acquired or disposed of
during the year are included in the consolidated statement of
comprehensive income from the effective date of acquisition and up
to the effective date of disposal, as appropriate.
Where necessary, adjustments are made to the financial
statements of subsidiaries to bring the accounting policies used
into line with those used by the Group.
All intra-Group transactions, balances, income and expenses are
eliminated on consolidation.
Non-controlling interests in subsidiaries are identified
separately from the Group's equity therein. Total comprehensive
income of subsidiaries is attributed to the owners of the Company
and to the non-controlling interests even if this results in the
non-controlling interests having a deficit balance.
Changes in the Group's ownership interests in existing
subsidiaries
Changes in the Group's ownership interests in subsidiaries that
do not result in the Group losing control over the subsidiaries are
accounted for as equity transactions. The carrying amounts of the
Group's interests and the non-controlling interests are adjusted to
reflect the changes in their relative interests in the
subsidiaries. Any difference between the amount by which the
non-controlling interests are adjusted and the fair value of the
consideration paid or received is recognised directly in equity and
attributed to owners of the Company.
When the Group loses control of a subsidiary, the profit or loss
on disposal is calculated as the difference between (i) the
aggregate of the fair value of the consideration received and the
fair value of any retained interest and (ii) the previous carrying
amount of the assets (including goodwill), and liabilities of the
subsidiary and any non-controlling interests. When assets of the
subsidiary are carried at revalued amounts or fair values and the
related cumulative gain or loss has been recognised in other
comprehensive income and accumulated in equity, the amounts
previously recognised in other comprehensive income and accumulated
in equity are accounted for as if the Company had directly disposed
of the relevant assets (i.e. reclassified to profit or loss or
transferred directly to retained earnings as specified by
applicable IFRSs). The fair value of any investment retained in the
former subsidiary at the date when control is lost is regarded as
the fair value on initial recognition for subsequent accounting
under IAS 39 Financial Instruments: Recognition and Measurement or,
when applicable, the cost on initial recognition of an investment
in an associate or a jointly controlled entity.
f) Business combinations
Acquisitions of subsidiaries and businesses are accounted for
using the acquisition method. The consideration for each
acquisition is measured at the aggregate of the fair values (at the
date of exchange) of assets given, liabilities incurred or assumed,
and equity instruments issued by the Group in exchange for control
of the acquiree. Acquisition-related costs are recognised in profit
or loss as incurred.
Where applicable, the consideration for the acquisition includes
any asset or liability resulting from a contingent consideration
arrangement, measured at its acquisition-date fair value.
Subsequent changes in such fair values are adjusted against the
cost of acquisition where they qualify as measurement period
adjustments (see below). All other subsequent changes in the fair
value of contingent consideration classified as an asset or
liability are accounted for in accordance with relevant IFRSs.
Changes in the fair value of contingent consideration classified as
equity are not recognised.
Where a business combination is achieved in stages, the Group's
previously-held interests in the acquired entity are remeasured to
fair value at the acquisition date (i.e. the date the Group attains
control) and the resulting gain or loss, if any, is recognised in
profit or loss. Amounts arising from interests in the acquiree
prior to the acquisition date that have previously been recognised
in other comprehensive income are reclassified to profit or loss,
where such treatment would be appropriate if that interest were
disposed of.
The acquiree's identifiable assets, liabilities and contingent
liabilities that meet the conditions for recognition under IFRS 3
(2008) are recognised at their fair value at the acquisition date,
except that:
-- deferred tax assets or liabilities and liabilities or assets
related to employee benefit arrangements are recognised and
measured in accordance with IAS 12 Income Taxes and IAS 19 Employee
Benefits respectively;
-- liabilities or equity instruments related to the replacement
by the Group of an acquiree's share-based payment awards are
measured in accordance with IFRS 2 Share-based Payment; and
-- assets (or disposal groups) that are classified as held for
sale in accordance with IFRS 5 Non-current Assets Held for Sale and
Discontinued Operations are measured in accordance with that
Standard.
If the initial accounting for a business combination is
incomplete by the end of the reporting period in which the
combination occurs, the Group reports provisional amounts for the
items for which the accounting is incomplete. Those provisional
amounts are adjusted during the measurement period (see below), or
additional assets or liabilities are recognised, to reflect new
information obtained about facts and circumstances that existed as
of the acquisition date that, if known, would have affected the
amounts recognised as of that date.
The measurement period is the period from the date of
acquisition to the date the Group obtains complete information
about facts and circumstances that existed as of the acquisition
date, and is subject to a maximum of one year.
g) Goodwill
Goodwill arising on consolidation represents the excess of the
cost of acquisition over the Group's interest in the fair value of
the identifiable assets and liabilities of a subsidiary, at the
date of acquisition. Goodwill is initially recognised as an asset
at cost and is subsequently measured at cost less any accumulated
impairment losses. Goodwill which is recognised as an asset is
reviewed for impairment at least annually. Any impairment is
recognised immediately in profit or loss and is not subsequently
reversed.
For the purpose of impairment testing, goodwill is allocated to
the Group's cash-generating unit expected to benefit from the
synergies of the combination. The cash-generating unit to which
goodwill has been allocated is tested for impairment annually, or
more frequently when there is an indication that the unit may be
impaired. If the recoverable amount of the cash-generating unit is
less than the carrying amount of the unit, the impairment loss is
allocated first to reduce the carrying amount of any goodwill
allocated to the unit and then to the other assets of the unit
pro-rata on the basis of the carrying amount of each asset in the
unit.
On disposal of a subsidiary, the attributable amount of goodwill
is included in the determination of the profit or loss on
disposal.
h) Intangible assets
Exploration and evaluation expenditure comprises costs which are
directly attributable to the acquisition of exploration licenses
and subsequent exploration expenditures.
Exploration and evaluation expenditure is carried forward as an
asset provided that one of the following conditions is met:
(i) Such costs are expected to be recouped in full through
successful development and exploration of the area of interest or
alternatively, by its sale;
(ii) Exploration and evaluation activities in the area of
interest have reached a stage which permits a reasonable assessment
of the existence of economically recoverable reserves with active
and significant operations in relation to the area continuing, or
planned for the future.
Identifiable exploration and evaluation assets acquired are
recognised as assets at their cost of acquisition. An impairment
review is performed when facts and circumstances suggest that the
carrying amount of the assets may exceed their recoverable amounts.
Exploration assets are reassessed on a regular basis and these
costs are carried forward provided that at least one of the
conditions outlined is met. Exploration rights are amortised over
the useful economic life of the mine to which it relates,
commencing when the asset is available for use.
Expenditure on research activities is recognised as an expense
in the period in which it is incurred.
Capitalised pre-production expenditure includes costs incurred
and capitalised during the plant construction phase which are
intangible in nature. Prior to obtaining the Mining Right in 2008,
which was granted for a period of 20 years, these capitalised
expenditures were amortised over the life of the work in progress.
Since the grant of the Mining Right these expenditures will be
amortised at a rate of 5% based on the life of the Mining
Right.
Rights to use the Power Line are capitalised at their cost of
acquisition and are being amortised over the useful economic life
at a rate of 5% per annum.
Underground exploration and evaluation expenditure will be
amortised from the point at which it is available for use over its
useful economic life, expected to be 5% per annum.
During the current year, a decision was taken that the mining
property is economically feasible therefore all previous
exploration and evaluation and pre-production development
expenditure has now been capitalised within property, plant and
equipment under construction in progress and has been transferred
from intangible assets.
i) Property, plant and equipment
Initial recognition
Upon completion of mine construction, the assets are transferred
into "Property, plant and equipment". Items of property, plant and
equipment and producing mine are stated at cost, less accumulated
depreciation and accumulated impairment losses.
The initial cost of an asset comprises its purchase price or
construction cost, any costs directly attributable to bringing the
asset into operation, the initial estimate of the rehabilitation
obligation, and for qualifying assets (where relevant), borrowing
costs. The purchase price or construction cost is the aggregate
amount paid and the fair value of any other consideration given to
acquire the asset. The capitalised value of a finance lease is also
included within property, plant and equipment.
When a mine construction project moves into the production
stage, the capitalisation of certain mine construction costs ceases
and costs are either regarded as part of the cost of inventory or
expensed, except for costs which qualify for capitalisation
relating to mining asset additions or improvements, underground
mine development or mineable reserve development.
Mines under construction
Upon transfer of "Exploration and evaluation assets" into
"Construction in progress" within "Property, plant and equipment",
all subsequent expenditure on the construction, installation or
completion of infrastructure facilities is capitalised within
"Construction in progress". Development expenditure is net of
proceeds from all, but the incidental sale of ore extracted during
the development phase. After production starts, all assets included
in "Construction in progress" are transferred to "Mining
properties" within "Property, plant and equipment".
Depreciation/amortisation
Accumulated mine development costs are depreciated/amortised on
a unit-of-production basis over the economically recoverable
reserves of the mine concerned, except in the case of assets whose
useful life is shorter than the life of the mine, in which case the
straight-line method is applied.
The unit-of-production rate for the depreciation/amortisation of
mine development costs takes into account expenditures incurred to
date, together with sanctioned future development expenditure.
Other plant and equipment such as mobile mine equipment is
generally depreciated on a straight-line basis over their estimated
useful lives as follows:
Buildings 20 years
Plant and equipment 5 to 20 years
Mining rights (life of Mining right 20 years)
Other tangible assets 3 to 5 years
Land is not depreciated. The estimated useful lives, residual
values and depreciation method are reviewed at the end of each
reporting period, with the effect of any changes in estimate
accounted for on a prospective basis.
Rights to use the Power Line are capitalised at their cost of
acquisition and are being amortised over the useful economic life
at a rate of 5% per annum.
Underground exploration and evaluation expenditure will be
amortised from the point at which it is available for use over its
useful economic life, expected to be 5% per annum.
Assets held under finance leases are depreciated over their
expected useful lives on the same basis as owned assets or, where
shorter, the term of the relevant lease.
An item of property, plant and equipment and any significant
part initially recognised is derecognised upon disposal or when no
future economic benefits are expected from its use or disposal. Any
gain or loss arising on derecognition of the asset (calculated as
the difference between the net disposal proceeds and the carrying
amount of the asset) is included in profit or loss when the asset
is derecognised.
The assets' residual values, useful lives and methods of
depreciation/amortisation are reviewed at each reporting period,
and adjusted prospectively if appropriate.
Major maintenance and repairs
Expenditure on major maintenance refits or repairs comprises the
cost of replacement assets or parts of assets and overhaul costs.
Where an asset or part of an asset that was separately depreciated
and is now written off is replaced, and it is probable that future
economic benefits associated with the item will flow to the Group
through an extended life, the expenditure is capitalised.
Where part of the asset was not separately considered as a
component, the replacement value is used to estimate the carrying
amount of the replaced asset(s).
j) Impairment of tangible and intangible assets excluding goodwill
At each balance sheet date, the Group reviews the carrying
amounts of its tangible and intangible assets to determine whether
there is any indication that those assets have suffered an
impairment loss. If any such indication exists, the recoverable
amount of the asset is estimated in order to determine the extent
of the impairment loss (if any). Where it is not possible to
estimate the recoverable amount of an individual asset, the Group
estimates the recoverable amount of the cash-generating unit to
which the asset belongs. Where a reasonable and consistent basis of
allocation can be identified, corporate assets are also allocated
to individual cash-generating units, or otherwise they are
allocated to the smallest group of cash-generating units for which
a reasonable and consistent allocation basis can be identified.
Intangible assets with indefinite useful lives and intangible
assets not yet available for use are tested for impairment at least
annually, and whenever there is an indication that the asset may be
impaired.
Recoverable amount is the higher of fair value less costs to
sell and value in use. In assessing value in use, the estimated
future cash flows are discounted to the present value using a
pre--tax discount rate that reflects current market assessments of
the time value of money and the risks specific to the asset for
which the estimates of future cash flows have not been
adjusted.
If the recoverable amount of an asset (or cash--generating unit)
is estimated to be less than its carrying amount, the carrying
amount of the asset (cash-generating unit) is reduced to its
recoverable amount. An impairment loss is recognised as an expense
immediately, unless the relevant asset is carried at a re-valued
amount, in which case the impairment loss is treated as a
revaluation decrease.
Where an impairment loss subsequently reverses, the carrying
amount of the asset (cash-generating unit) is increased to the
revised estimate of its recoverable amount, but so that the
increased carrying amount does not exceed the carrying amount that
would have been determined had no impairment loss been recognised
for the asset (cash-generating unit) in prior years. A reversal of
an impairment loss is recognised as income immediately, unless the
relevant asset is carried at a re-valued amount, in which case the
reversal of the impairment loss is treated as a revaluation
increase.
k) Financial liabilities
Financial liabilities are classified as either financial
liabilities 'at FVTPL' or 'other financial liabilities'.
Financial liabilities at FVTPL
Financial liabilities are classified as at FVTPL when the
financial liability is either held for trading or it is designated
as at FVTPL.
A financial liability is classified as held for trading if:
-- it has been incurred principally for the purpose of
repurchasing it in the near term; or
-- on initial recognition it is part of a portfolio of
identified financial instruments that the Group manages together
and has a recent actual pattern of short-term profit-taking; or
-- it is a derivative that is not designated and effective as a hedging instrument.
A financial liability other than a financial liability held for
trading may be designated as at FVTPL upon initial recognition
if:
-- such designation eliminates or significantly reduces a
measurement or recognition inconsistency that would otherwise
arise; or
-- the financial liability forms part of a group of financial
assets or financial liabilities or both, which is managed and its
performance is evaluated on a fair value basis, in accordance with
the Group's documented risk management or investment strategy, and
information about the grouping is provided internally on that
basis; or
-- it forms part of a contract containing one or more embedded
derivatives, and IAS 39 Financial Instruments: Recognition and
Measurement permits the entire combined contract (asset or
liability) to be designated as at FVTPL.
Financial liabilities at FVTPL are stated at fair value, with
any gains or losses arising on remeasurement recognised in profit
or loss. The net gain or loss recognised in profit or loss
incorporates any interest paid on the financial liability and is
included in the 'other gains and losses' line item in the income
statement. Fair value is determined in the manner described in note
25.
Other financial liabilities
Other financial liabilities, including borrowings, are initially
measured at fair value, net of transaction costs.
Other financial liabilities are subsequently measured at
amortised cost using the effective interest method, with interest
expense recognised on an effective yield basis.
The effective interest method is a method of calculating the
amortised cost of a financial liability and of allocating interest
expense over the relevant period. The effective interest rate is
the rate that exactly discounts estimated future cash payments
through the expected life of the financial liability, or, where
appropriate, a shorter period, to the net carrying amount on
initial recognition.
Derecognition of financial liabilities
The Group derecognises financial liabilities when, and only
when, the Group's obligations are discharged, cancelled or they
expire.
Derivative financial instruments
The Group enters into a variety of derivative financial
instruments to manage its exposure to interest rate and foreign
exchange rate risk, including foreign exchange forward contracts,
interest rate swaps and cross currency swaps. Further details of
derivative financial instruments are disclosed in note 25.
Derivatives are initially recognised at fair value at the date a
derivative contract is entered into and are subsequently remeasured
to their fair value at each balance sheet date. The resulting gain
or loss is recognised in profit or loss immediately unless the
derivative is designated and effective as a hedging instrument, in
which event the timing of the recognition in profit or loss depends
on the nature of the hedge relationship. The Group designates
certain derivatives as either hedges of the fair value of
recognised assets or liabilities or firm commitments (fair value
hedges), hedges of highly probable forecast transactions or hedges
of foreign currency risk of firm commitments (cash flow hedges), or
hedges of net investments in foreign operations.
A derivative with a positive fair value is recognised as a
financial asset whereas a derivative with a negative fair value is
recognised as a financial liability. A derivative is presented as a
non-current asset or a non-current liability if the remaining
maturity of the instrument is more than 12 months and it is not
expected to be realised or settled within 12 months. Other
derivatives are presented as current assets or current
liabilities.
Embedded derivatives
Derivatives embedded in other financial instruments or other
host contracts are treated as separate derivatives when their risks
and characteristics are not closely related to those of the host
contracts and the host contracts are not measured at FVTPL.
An embedded derivative is presented as a non-current asset or a
non-current liability if the remaining maturity of the hybrid
instrument to which the embedded derivative relates is more than 12
months and is not expected to be realised or settled within 12
months. Other derivatives are presented as current assets or
current liabilities.
l) Taxation
The tax expense represents the sum of the tax currently payable
and deferred tax.
The tax currently payable is based on taxable losses for the
period. Taxable loss differs from net loss as reported in the
income statement because it excludes items of income or expense
that are taxable or deductible in other years and it further
excludes items that are never taxable or deductible. The Group's
liability for current tax is calculated using tax rates that have
been enacted or substantively enacted by the balance sheet
date.
Deferred tax is the tax expected to be payable or recoverable on
differences between the carrying amounts of assets and liabilities
in the financial statements and the corresponding tax bases used in
the computation of taxable profit, and is accounted for using the
balance sheet liability method. Deferred tax liabilities are
generally recognised for all taxable temporary differences and
deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which
deductible temporary differences can be utilised. Such assets and
liabilities are not recognised if the temporary differences arise
from the initial recognition of goodwill or from the initial
recognition (other than in a business combination) of other assets
and liabilities in a transaction that affects neither the tax
profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary
differences arising on investments in subsidiaries and associates,
and interests in joint ventures, except where the Group is able to
control the reversal of the temporary difference and it is probable
that the temporary difference will not reverse in the foreseeable
future.
The carrying amount of deferred tax assets is reviewed at each
balance sheet date and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow
all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to
apply in the period when the liability is settled or the asset is
realised. Deferred tax is charged or credited in the income
statement, except when it relates to items charged or credited
directly to equity, in which case the deferred tax is also dealt
with in equity.
Deferred tax assets and liabilities are offset when there is a
legally enforceable right to set off current tax assets against
current tax liabilities and when they relate to income taxes levied
by the same taxation authority and the Group intends to settle its
current tax assets and liabilities on a net basis.
m) Financial instruments
Financial assets and financial liabilities are recognised on the
Group's balance sheet when the Group becomes a party to the
contractual provisions of the instrument.
Trade receivables
Trade receivables are measured at initial recognition at fair
value, and are subsequently measured at amortised cost using the
effective interest rate method. Appropriate allowances for
estimated irrecoverable amounts are recognised in the income
statement when there is objective evidence that the asset is
impaired. The allowance recognised is measured as the difference
between the asset's carrying amount and the present value of
estimated future cash flows discounted at the effective interest
rate computed at initial recognition.
Cash and cash equivalents
Cash and cash equivalents comprises cash in hand and demand
deposits, other short-term highly liquid investments that are
readily convertible to a known amount of cash and are subject to an
insignificant risk of changes in value, and restricted cash.
Financial liabilities and equity
Financial liabilities and equity instruments are classified
according to the substance of the contractual arrangements entered
into. An equity instrument is any contract that evidences a
residual interest in the assets of the Group after deducting all of
its liabilities.
Convertible bond policy
The component parts of compound instruments (convertible bonds)
issued by the Group are classified separately as an amortised cost
financial liability and an embedded derivative financial liability
in accordance with the substance of the contractual arrangement. At
the date of issue, the fair value of the embedded derivative
financial liability component is estimated using observable market
data input into the Black Scholes model, modified for the Barone
Adesi Whaley approximation. This amount is recorded as an embedded
derivative financial liability held at fair value through profit
and loss. The amortised cost financial liability (host debt
contract) is determined by deducting the amount of the embedded
derivative component from the fair value of the compound instrument
as a whole. The host debt contract is held on an amortised cost
basis using the effective interest method until extinguished upon
conversion or at the instrument's maturity date.
Financial guarantee contract liabilities
Financial guarantee contract liabilities are measured initially
at their fair values and, if not designated as at FVTPL, are
subsequently measured at the higher of:
-- the amount of the obligation under the contract, as
determined in accordance with IAS 37 Provisions, Contingent
Liabilities and Contingent Assets; and
-- the amount initially recognised less, where appropriate,
cumulative amortisation recognised in accordance with the revenue
recognition policies set out above.
Trade payables
Trade payables are initially measured at fair value, and are
subsequently measured at amortised cost, using the effective
interest rate method.
The effective interest method is a method of calculating the
amortised cost of a financial asset and of allocating interest
income over the relevant period. The effective interest rate is the
rate that exactly discounts estimated future cash receipts
(including all fees on points paid or received that form an
integral part of the effective interest rate, transaction costs and
other premiums or discounts) through the expected life of the
financial asset, or, where appropriate, a shorter period.
Equity instruments
Equity instruments issued by the Company are recorded at the
proceeds received, net of direct issue costs.
Intercompany receivables
Intercompany receivables are initially recognised by the Company
at fair value and are subsequently measured at amortised cost using
the effective interest rate method.
n) Foreign currencies
The individual financial statements of each Group Company are
presented in the currency of the primary economic environment in
which it operates (its functional currency). For the purpose of the
consolidated financial statements, the results and financial
position of each Group Company are expressed in pounds sterling,
which is the functional currency of the Company, and the
presentation currency for the consolidated financial
statements.
In preparing the financial statements of the individual
entities, transactions in currencies other than the entity's
functional currency (foreign currencies) are recorded at the rates
of exchange prevailing on the dates of the transactions. At each
balance sheet date, monetary assets and liabilities that are
denominated in foreign currencies are retranslated at the rates
prevailing on the balance sheet date. Non-monetary items carried at
fair value that are denominated in foreign currencies are
retranslated at the rates prevailing on the date when the fair
value was determined. Non-monetary items that are measured in terms
of historical cost in a foreign currency are not translated.
Group and Company
Exchange differences arising on the settlement of monetary
items, and on the retranslation of monetary items, are included in
the income statement for the period. Exchange differences arising
on the retranslation of non-monetary items carried at fair value
are included in the income statement for the period except for
differences arising on the retranslation of non-monetary items in
respect of which gains and losses are recognised directly in
equity. For such non-monetary items, any exchange component of that
gain or loss is also recognised directly in equity.
In addition, in the case of presenting consolidated financial
statements, any foreign exchange differences arising on elimination
of intercompany loan balances upon consolidation of the Group
Companies, are classified as equity and transferred to the Group's
translation reserve, as these loans are for long term investment
purposes.
Determining the rate of exchange to be used:
For the purpose of presenting consolidated financial statements,
the assets and liabilities of the Group's foreign operations are
translated at exchange rates prevailing on the balance sheet date.
Income and expense items are translated at the average exchange
rates for the period, unless exchange rates fluctuated
significantly during that period, in which case the exchange rates
at the dates of the transactions are used. Exchange differences
arising, if any, are classified as other comprehensive income and
transferred to the Group's translation reserve. Such translation
differences are recognised in the income statement in the period in
which the foreign operation is disposed of.
Goodwill and fair value adjustments arising on the acquisition
of a foreign entity are treated as assets and liabilities of the
foreign entity and translated at the closing rate.
o) Environmental restoration and decommissioning obligations
An obligation to incur environmental restoration, rehabilitation
and decommissioning costs arises when disturbance is caused by the
development or ongoing production of a mining property. Such costs
arising from the decommissioning of plant and other site
preparation work, discounted to their net present value, are
provided for and capitalised at the start of each project, as soon
as the obligation to incur such costs arises. These costs are
recognised in the income statement over the life of the operation,
through the depreciation of the asset and the unwinding of the
discount on the provision. Costs for restoration of subsequent site
damage which is created on an ongoing basis during production are
provided for at their net present values and recognised in the
income statement as extraction progresses.
Changes in the measurement of a liability relating to the
decommissioning of plant or other site preparation work (that
result from changes in the estimated timing or amount of the cash
flow, or a change in the discount rate) are added to or deducted
from, the cost of the related asset in the current period. If a
decrease in the liability exceeds the carrying amount of the asset,
the excess is recognised immediately in the income statement. If
the asset value is increased and there is an indication that the
revised carrying value is not recoverable, an impairment test is
performed in accordance with the accounting policy above.
p) Inventories
Inventory and work in progress are valued at the lower of cost
and net realisable value.
Work in progress relates to tailings and was valued at the time
of acquisition at GBP2.84 per carat based on an in situ valuation
equivalent to 8% of the market value of US$63 per carat achieved at
a sale of Lace project diamonds in May 2005. The number of carats
in inventory (370,285 carats) was based on an expert
determination provided to the Company by a qualified external
valuer. Work in progress was amortized on the units of production
method. During 2012, tailings inventory was written off as
processing it was deemed uneconomical at current diamond
prices.
Inventory relating from development of the underground is
carried at the lower of cost and net realisable value.
q) Revenue
Revenue from the sale of diamonds is recorded when the diamonds
are sold at tender. The Lace plant was commissioned on 1 October
2007 before full operations were suspended in 2008.
Revenue earned from sales prior to the new operations achieving
commercial production are recognised as a reduction in the carrying
value of the pre-production expenses held within intangible assets.
Revenue is measured at the fair value of the consideration received
or receivable.
Interest income is accrued on a time basis, by reference to the
principal outstanding and at the effective interest rate
applicable, which is the rate that exactly discounts estimated
future cash receipts through the expected life of the financial
asset to that asset's net carrying value.
Revenues from the sale of carats recovered during the
development phase are recognised as a credit against the cost of
development.
r) Finance leases
Leases are classified as finance leases whenever the terms of
the lease transfer substantially all the risks and rewards of
ownership to the lessee. All other leases are classified as
operating leases. Rentals payable under operating leases are
charged to income on a straight-line basis over the term of the
relevant lease. Assets held under finance leases are initially
recognised as assets of the Group at their fair value at the
inception of the lease or, if lower, at the present value of the
minimum lease payments. The corresponding liability to the lessor
is included in the balance sheet as a finance lease obligation.
s) Share-based payments
Equity-settled share-based payments to employees and others
providing similar services are measured at the fair value of the
equity instruments at the grant date. The fair value excludes the
effect of non market-based vesting conditions. Details regarding
the determination of the fair value of equity-settled share-based
transactions are set out in note 24.
The fair value determined at the grant date of the
equity-settled share-based payments is expensed on a straight-line
basis over the vesting period, based on the Group's estimate of
equity instruments that will eventually vest. At each balance sheet
date, the Group revises its estimate of the number of equity
instruments expected to vest as a result of the effect of non
market-based vesting conditions. The impact of the revision of the
original estimates, if any, is recognised in profit or loss such
that the cumulative expense reflects the revised estimate, with a
corresponding adjustment to equity reserves.
SAYE share options granted to employees are treated as cancelled
when employees cease to contribute to the scheme. This results in
accelerated recognition of the expenses that would have arisen over
the remainder of the original vesting period.
For cash-settled share-based payments, a liability is recognised
for the goods or services acquired, measured initially at the fair
value of the liability. At each balance sheet date until the
liability is settled, and at the date of settlement, the fair value
of the liability is remeasured, with any changes in fair value
recognised in profit or loss for the year.
t) Critical accounting judgements
In the process of applying the Group's accounting policies,
which are described above, the Directors have made the following
judgements that have the most significant effect on the amounts
recognised in the financial information.
- Valuation of inventory - Judgement was applied in calculating
the initial carrying value of inventory and judgement continues to
be applied in assessing the net realisable value. See accounting
policy p) above.
- Valuation of warrants, share options and ordinary shares
issued as consideration - Judgement is applied in determining
appropriate assumptions to be used in calculating the fair value of
warrants, shares and share options issued. See notes 22 and 24.
- Valuation of convertible bonds - Judgement is applied in
determining appropriate assumptions to be used in calculating the
fair value of convertible bonds. See note 16.
- Impairment of goodwill and other intangible assets - Judgement
is applied in determining appropriate assumptions to be used in
testing for and calculating impairment. See policy g) and h)
above.
- Going concern - Judgement is applied in assessing the
likelihood and timing of future cash flows associated with the
Group's activities. Judgement is also applied in assessing the
likelihood of receiving future funding. See page 31.
2. business and geographical segments
For management purposes, the Group has one business and
geographical segment - diamond mining and exploration at the Lace
mine in South Africa.
3. OPERATING LOSS
Group Group Company Company
2012 2011 2012 2011
GBP GBP GBP GBP
Operating loss is after charging
(crediting):
Auditors' remuneration 79,855 75,500 53,255 52,500
Foreign exchange losses 372 110,806 372 110,806
Profit on disposal of fixed assets - (1,985) - -
Depreciation and amortisation 669,656 918,291 19,817 19,817
Write off of tailings inventory 275,561 - -
Impairment of intangible assets - 2,373,616 - -
Write off Botswana project - 1,013,032 - -
The analysis of auditors' remuneration
is as follows:
Fees payable to the Company's auditors
for the audit of Company's accounts 53,255 52,500 53,255 52,500
Fees payable to the Company's auditors
and their
associates for other services to
the Group
The audit of the Company's subsidiaries 26,600 23,000 - -
Total audit fees 79,855 75,500 53,255 52,500
TOTAL 79,855 75,500 53,255 52,500
There were no non-audit services in 2012 (2011 - nil).
4. STAFF COSTS
Staff costs of the Group and Company were:
GROUP 2012 2011
GBP GBP
Wages and salaries 948,160 775,874
Social security costs 85,061 48,100
1,033,221 823,974
Average number of administrative staff 8 9
Average number of operational staff 62 58
Average number of employees 70 67
2012 2011
COMPANY GBP GBP
Wages and salaries 155,208 188,465
Social security costs 18,118 22,414
173,326 210,879
Average number of employees 3 4
5. DIRECTORS' EMOLUMENTS
Directors' emoluments for the year ended 31 December 2012 and
2011 and for the highest paid director were as follows:
2012 2011
GBP GBP
Directors' remuneration
Fees paid by the Company and its subsidiaries 277,541 252,167
Emoluments of highest paid director 163,541 137,500
Refer to the Remuneration Report where the detail of directors'
remuneration has been disclosed.
6. Tax
GROUP 2012 2011
GBP GBP
Current tax - -
Deferred tax (see note 19) - -
Tax expense for the year - -
The charge for the year can be reconciled to the loss per the
income statement as follows:
2012 2011
GBP GBP
Loss for the year (3,534,940) (4,239,146)
Tax at the UK corporation tax rate of 24.5% (2011
- 26.5%) (866,060) (1,123,374)
Expenses not deductible 55,710 308,733
Tax losses carried forward 810,350 814,641
Tax expense for the year - -
In March 2012, the UK Government announced a reduction in the
standard rate of UK corporation tax to 24% effective 1 April 2012
and to 23% effective 1 April 2013. These rate reductions became
substantively enacted in March 2012 and July 2012 respectively.
In December 2012, the UK Government also proposed to further
reduce the standard rate of UK corporation tax to 21% effective 1
April 2014.
In March 2013, the UK Government also proposed to further reduce
this standard rate of UK corporation tax to 20% effective 1 April
2015, but this change has not been substantively enacted.
The effect of these tax rate reductions on the deferred tax
balance will be accounted for in the period in which the tax rate
reductions are substantively enacted.
7. LOSS PER SHARE
a) Basic loss per share
Basic loss per share is calculated by dividing the loss for the
year by the weighted average number of shares in issue during the
year. The weighted average number of shares used is 247,576,401
(2011 - 203,928,771).
b) Diluted loss per share
International Accounting Standard 33 requires presentation of
diluted earnings per share when a company could be called upon to
issues shares that would decrease the net profit or increase the
net loss per share. The calculation of diluted earnings per share
does not assume conversion, exercise, or other issue of potential
ordinary shares that would increase the net profit or decrease the
net loss per share. As the Group is currently in a loss-making
position then the inclusion of the potential ordinary shares
associated with share options or the convertible bonds in the
diluted loss per share calculation would serve to decrease the net
loss per share. On that basis, no adjustment has been made for
diluted loss per share.
c) Headline loss per share
The Group presents an alternative measure of loss per share
after excluding all capital gains and losses from the loss
attributable to ordinary shareholders. The impact of this is as
follows:
Basic 2012 2011
Loss per share (1.22p) (1.87p)
Effect of gain on insurance settlement - 0.80p
Effect of impairment of intangible assets - (1.36p)
Adjusted loss per share (1.22p) (2.43p)
8. INTANGIBLE ASSETS
For the year ended 31 December 2012
GROUP Goodwill Power line Power line Pre-production Under-ground Mineral Total
GBP Phase 1 Phase 2 capitalised capitalised rights GBP
GBP GBP expenses expenses GBP
GBP GBP
Cost
At 1 January
2012 4,606,026 395,661 150,538 453,472 6,510,102 629,528 12,745,327
Transfer to
property,
plant and
equipment - (395,661) (150,538) (453,472) (6,510,102) (629,528) (8,139,301)
At 31
December
2012 4,606,026 - - - - - 4,606,026
Accumulated
amortisation
At 1 January
2012 - (79,752) (30,344) (62,722) (3,198,777) (125,905) (3,497,500)
Transfer to
property,
plant and
equipment - 79,752 30,344 62,722 3,198,777 125,905 3,497,500
At 31 - - - - - - -
December 2012
Carrying
amount
At 31
December
2012 4,606,026 - - - - - 4,606,026
At 31
December
2011 4,606,026 315,909 120,194 390,750 3,311,325 503,623 9,247,827
At 1 January 2012, a decision was taken that the mining property
is economically feasible and therefore all previous exploration and
evaluation and pre-production development expenditure has been
transferred from intangible assets and has now been capitalised
within property, plant and equipment under construction in
progress.
8. INTANGIBLE ASSETS (continued)
For the year ended 31 December 2011
GROUP Goodwill Jwaneng Power Power Pre-production Under-ground Mineral Total
GBP GBP line line capitalised capitalised rights GBP
Phase 1 Phase 2 expenses expenses GBP
GBP GBP GBP GBP
Cost
At 1 January
2011 4,606,026 310,422 484,040 184,164 554,764 4,679,942 681,614 11,500,972
Additions - 702,610 - - - 3,293,996 - 3,996,606
Impairment - (1,013,032) - - - - - (1,013,032)
Exchange
differences - - (88,379) (33,626) (101,292) (1,463,836) (52,086) (1,739,219)
At 31
December
2011 4,606,026 - 395,661 150,538 453,472 6,510,102 629,528 12,745,327
Accumulated
amortisation
At 1 January
2011 - - (71,899) (27,356) (76,732) (1,668,939) (102,242) (1,947,168)
Charge for
the year - - (22,716) (8,643) - - (32,440) (63,799)
Impairment - - - - - (2,373,616) - (2,373,616)
Exchange
differences - - 14,863 5,655 14,010 843,778 8,777 887,083
At 31
December
2011 - - (79,752) (30,344) (62,722) (3,198,777) (125,905) (3,497,500)
Carrying
amount
At 31
December
2011 4,606,026 - 315,909 120,194 390,750 3,311,325 503,623 9,247,827
At 31
December
2010 4,606,026 310,422 412,141 156,808 478,032 3,011,003 579,372 9,553,804
In 2011 Lace Diamond Mines (Pty) Limited reached an agreement
with Mutual and Federal Insurance Limited on a claim for damage to
timbers and pumps in the vertical shaft at the Lace mine incurred
during heavy rains earlier in the year; after deductibles, we
received R25 million (GBP2.2 million) and recognised an impairment
against underground capitalised expenses of R27.5 million (GBP2.4
million).
9. property, plant and equipment
For the year ended 31 December 2012
GROUP Land Plant and Mining Construction Total
and equipment rights in progress
buildings
GBP GBP GBP GBP GBP
Cost
At 1 January 2012 241,829 7,869,059 - - 8,110,888
Transfer from intangible
assets 546,199 - 629,528 6,963,574 8,139,301
Additions 78,282 97,709 - 780,773 956,764
Exchange differences (69,737) (658,986) (19,461) (624,214) (1,372,398)
At 31 December 2012 796,573 7,307,782 610,067 7,120,133 15,834,555
Accumulated depreciation
At 1 January 2012 (62,318) (3,439,286) - - (3,501,604)
Transfer from intangible
assets (110,097) - (125,905) (3,261,498) (3,497,500)
Charge for the year (41,058) (597,524) (31,075) - (669,656)
Exchange differences 16,472 317,346 4,463 272,198 610,478
At 31 December 2012 (197,001) (3,719,464) (152,517) (2,989,300) (7,058,282)
Carrying amount
At 31 December 2012 599,572 3,588,318 457,550 4,130,833 8,776,273
At 31 December 2011 179,511 4,429,773 - - 4,609,284
Plant and equipment includes mining fleet, processing plant,
office equipment and motor vehicles which were previously
separately classified. The property, plant and equipment is pledged
as security for the Convertible Bonds. However, once the IDC loan
is drawn down in whole or in part, the Bondholders security
interest in these assets will be subordinated to the security
interest of the Industrial Development Corporation of South Africa
Limited ("IDC"). On 1 January 2012, a decision was taken that the
mining property is economically feasible therefore all previous
exploration and evaluation and pre-production development
expenditure has now been capitalised within property, plant and
equipment under construction in progress and has been transferred
from intangible assets.
9. property, plant and equipment (continued)
For the year ended 31 December 2011
GROUP Plant and Mining Land Other Total
equipment fleet and tangible
buildings assets
GBP GBP GBP GBP GBP
Cost
At 1 January 2011 6,336,605 2,508,082 322,693 423,150 9,590,530
Additions 110,081 179,100 48,521 39,092 376,794
Disposals - - (72,280) (10,617) (82,897)
Reclassification (542,168) 542,168 - - -
Exchange differences (1,165,380) (471,618) (57,105) (79,436) (1,773,539)
At 31 December 2011 4,739,138 2,757,732 241,829 372,189 8,110,888
Accumulated depreciation
At 1 January 2011 (851,651) (2,231,957) (62,626) (183,994) (3,330,228)
Charge for the year (251,047) (538,428) (12,047) (52,970) (854,492)
Disposals - - - 10,617 10,617
Exchange differences 174,672 448,645 12,355 36,827 672,499
At 31 December 2011 (928,026) (2,321,740) (62,318) (189,520) (3,501,604)
Carrying amount
At 31 December 2011 3,811,112 435,992 179,511 182,669 4,609,284
At 31 December 2010 5,484,954 276,125 260,067 239,156 6,260,302
9. PROPERTY, PLANT AND EQUIPMENT (continued)
For the year ended 31 December 2012 Mining
COMPANY rights
GBP
Cost and carrying amount
At 1 January 2012 317,075
Charge for the year (19,817)
At 31 December 2012 297,258
For the year ended 31 December 2011 Mining
COMPANY rights
GBP
Cost and carrying amount
At 1 January 2011 336,892
Charge for the year (19,817)
At 31 December 2011 317,075
The Group tests annually for impairment, or more frequently if
there are indications that goodwill might be impaired. The Group
has one reportable business segment and all goodwill is associated
with that segment. The recoverable amounts of the cash generating
unit ("CGU") is determined from value in use calculations. The key
assumptions for the value in use calculations are those regarding
the discount rates, growth rates and expected changes to selling
prices and direct costs during the period. A post tax discount rate
of 10% has been used, which is consistent with the rate used for
determining the value of purchased intangibles.
The Group's test for impairment is based on several
considerations including a model adopted by management from the
model prepared for the Lace Mine by one of its technical advisors.
This model uses grade assumptions based on the resource statement
of the Group's technical advisor and it uses diamond prices
considered representative of market prices. The model assumes that
the Lace mine will reach full production of 1,200,000 tonnes of
kimberlite in 2015 and run through 2040. The valuations of the Lace
Mine generated by the Model under variable sets of assumptions as
to grades, revenues and costs indicate that there has been no
impairment of goodwill during the year. Management have considered
the key assumptions to be reasonable. A reasonable possible change
in a key assumption would not lead to an indicator of impairment of
the cash generating unit which contains goodwill.
10. INVESTMENT IN SUBSIDIARIES
For the year ended 31 December 2012
COMPANY GBP
Cost and carrying amount
At 1 January 2012 4,217,501
Capital contribution 455,000
At 31 December 2012 4,672,501
For the year ended 31 December 2011
COMPANY GBP
Cost and carrying amount
At 1 January 2011 and 31 December
2011 4,217,501
The investment represents 100% of the share capital of Crown
Diamond Mining Limited ("CDM") which was acquired on 15 May 2006.
CDM changed its name to Diamondcorp Holdings Limited in 2007
("DHL") and is a Company registered in the British Virgin
Islands.
The capital contribution made during 2012 relates to the
financial guarantee that DiamondCorp plc has provided to Soapstone
Investments (Pty) Ltd ("Soapstone"), its 100% owned subsidiary
registered in South Africa, in respect of the convertible bonds
issued by Soapstone during the year (see note 16). The financial
guarantee contract has been recorded at fair value in DiamondCorp
plc's balance sheet with a corresponding increase in the carrying
value of the investment.
11. INventories
GROUP 2012 2011
GBP GBP
Work in progress (tailings) - 285,402
Diamond inventories 293,283 141,889
Consumable and other inventories 4,191 15,142
297,474 442,433
Diamond inventories at 31 December 2012 totalled 7,193 carats.
Of these, 2,168 carats were recovered from bulk testing and the
balance (5,025 carats) from tailings.
During 2012, tailings inventory was written off as processing it
was deemed uneconomical at current diamond prices.
12. Other RECEIVABLES
Group Group Company Company
2012 2011 2012 2011
GBP GBP GBP GBP
Receivables due from Group undertakings - - 23,436,966 22,802,199
Prepayments and other receivables 195,028 182,350 9,167 32,865
195,028 182,350 23,446,133 22,835,064
The Directors consider that the carrying amount of these assets
approximates their fair value. All receivables balances are
non-interest bearing.
Included in prepayments and other receivables is an
environmental rehabilitation and decommissioning bond held by the
Department of Mineral Resources in the amount of GBP92,372 (2011 -
GBP67,923) providing for the originally determined cost of
environmental rehabilitation and decommissioning on termination of
the Lace project.
13. cash and cash equivalents
Group Company
2012 2011 2012 2011
GBP GBP GBP GBP
Cash and cash equivalents 4,319,776 2,632,760 1,363,545 257,042
Included in the cash and cash equivalents at 31 December 2012
are the following:
- GBP2,922,716 (R 40 million) of proceeds from the issue of the
SA Bonds held in an escrow account;
- GBP1,210,000 of restricted cash being the proceeds from the issue of the UK Bonds;
The proceeds from the issue of bonds are to be released upon
completion of the loan agreement between Diamondcorp Holdings
Limited, an associated company, and Laurelton Diamonds, Inc. (note
27).
14. OTHER PAYABLES
Group Group Company Company
2012 2011 2012 2011
GBP GBP GBP GBP
Accruals and deferred income 833,986 498,876 482,082 118,580
The Directors consider that the carrying amount of these
liabilities approximates their fair value. All payables balances
are non-interest bearing.
15. Borrowings
On 17 October 2008, the Company arranged a long term loan with
Africa Opportunity Fund L.P. ("AOF") in the amount of US$5,000,000.
The loan was secured by the Company's equity interest in Lace
Diamond Mines (Pty) Ltd and by the assets of the Company's
subsidiaries. In October 2011, the final amount due under the loan
with AOF was repaid in full and the Company and its subsidiaries
have been released of all security. The following discussion
provides a history of the loan.
Reconciliation of payments made on Principal Interest Total
long term loan:
US$ US$ US$
Amounts paid as at 31 December 2011 5,000,000 1,473,928 6,473,928
Interest accrued daily and was paid half-yearly at a rate of
12%. Any portion of the interest in relation to a reporting period
that remained unpaid, was accrued for.
The cost of the warrants granted to AOF, GBP57,566, (see note
22) has been offset against the loan in accordance with IAS 39. The
cost of these warrants was to be expensed over the life of the loan
and did not constitute payment towards the loan. The warrant cost
expensed during the period was GBPnil (2011 - GBPnil). The loan was
repaid in full in 2011.
16. convertible loan notes
UK Bonds
On 14 December 2012, the Company, issued GBP1,410,000 14% senior
secured bonds (the "UK Bonds") to investors in the United Kingdom.
The proceeds of the UK Bonds was held in escrow and released from
escrow upon completion of a loan agreement between Diamondcorp
Holdings Limited, an associated company, and Laurelton Diamonds,
Inc.. The UK Bonds are due for repayment 31 December 2018 with
interest payable quarterly in arrears, with the first 24 months of
interest on the UK Bonds to be accumulated and added to the
principal amount to be repaid. Bondholders can request conversion
of the UK Bonds and outstanding interest at any time after 41 days
from issue, or 24 January 2013. Any request for conversion can be
settled at the absolute discretion of the Company with ordinary
shares at 5.81 pence per share or the cash equivalent of the number
of underlying shares multiplied by the share price at the time of
conversion. The UK Bonds are secured by the assets of the Company
and have a reversionary interest in the assets of Lace Diamond
Mines (Pty) Limited. GBP250,000 of the UK Bonds were taken up by
directors of the Company or other related parties (see note
20).
SA Bonds
On 14 December 2012, Soapstone Investments (Pty) Ltd
("Soapstone"), wholly-owned subsidiary of the Company, issued R
40,000,000 14% senior secured bonds (the "SA Bonds") to investors
in South Africa. The proceeds of the SA Bonds was held in escrow
and released from escrow upon completion of a loan agreement
between Diamondcorp Holdings Limited, an associated company, and
Laurelton Diamonds, Inc.. The SA Bonds are due for repayment 31
December 2018 with interest payable quarterly in arrears, the first
payment being 14 March 2013. The first two years of interest will
be held in escrow to be paid on the quarterly interest dates.
Bondholders can request conversion of the SA Bonds and outstanding
interest at any time after 41 days from issue, or 24 January 2013.
Any request for conversion can be settled at the absolute
discretion of the Company with ordinary shares at R 0.81 per share
or the cash equivalent of the number of underlying shares
multiplied by the share price at the time of conversion. The SA
Bonds are secured by the assets of Soapstone and have a
reversionary interest in the assets of Lace Diamond Mines (Pty)
Limited. The SA Bond is also secured by way of a financial
guarantee provided by DiamondCorp plc.
16. convertible loan notes (continued)
The net proceeds received from the issue of the UK Bonds and SA
Bonds (together "the Bonds") have been split between the financial
liability element and an embedded derivative component,
representing the fair value of the embedded option to convert the
financial liability with reference to the Company's share price
(either through the payment of cash or issuance of equity), as
follows:
GROUP 2012
GBP
Proceeds on issue of convertible loan
notes (net of issue costs) 3,911,944
Embedded derivative component
Balance at date of issue 1,462,589
Fair value movement 44,821
Exchange differences 17,981
Balance at 31 December 2012 1,525,391
Liability component
Balance at date of issue 2,577,340
Effective interest charged 31,261
Exchange differences 34,138
Balance at 31 December 2012 2,642,739
The liability component is measured at amortised cost. The
interest expensed for the year is calculated by applying an
effective interest rate of 23.6 per cent for the UK Bonds and 26.5
per cent for the SA Bonds to the liability component for the 17 day
period since the loan notes were issued. The difference between the
carrying amount of the liability component at the date of issue and
the amount reported in the balance sheet at 31 December 2012
represents the effective interest rate less interest paid to that
date.
Issue costs totalling GBP366,920 were incurred in issuing the UK
and SA Bonds. Of this amount, GBP127,985 was allocated to the
embedded derivative element of the convertibe bonds and was
recognised in the income statement during the year. The remaining
amount was allocated to the liability component and was capitalised
onto the balance sheet and is taken into account when calculating
the effective interest rate for the Bonds.
16. convertible loan notes (continued)
COMPANY 2012
GBP
Proceeds on issue of convertible loan
notes (net of issue costs) 1,216,494
Embedded derivative component
Balance at date of issue 515,372
Fair value movement 26,226
Balance at 31 December 2012 541,598
Liability component
Balance at date of issue 771,851
Effective interest charged 8,410
Balance at 31 December 2012 780,261
Issue costs totalling GBP193,506 were incurred in issuing the UK
Bonds. Of this amount, GBP70,729 was allocated to the embedded
derivative element of the convertible bonds and was recognised in
the income statement during the year. The remaining amount was
allocated to the liability component and was capitalised onto the
balance sheet and is taken into account when calculating the
effective interest rate for the Bonds.
DiamondCorp plc has provided a financial guarantee to the
Bondholders of the SA Bond, guaranteeing any amounts due under the
SA Bond agreement by its wholly-owned subsidiary, Soapstone
Investments (Pty) Ltd. This financial guarantee meets the
definition of a financial guarantee contract under IAS 39,
Financial Instruments: Recognition and Measurement. In accordance
with IAS 39, the financial guarantee contract must be recognised
initially at fair value. The fair value of the financial guarantee
contract has been determined to be GBP455,000 and this amount has
been recorded as a financial liability on the Company's balance
sheet, with a corresponding increase in the cost of its investment
balance.
Based on expectations at the end of the reporting period, the
Company considers that it is more likely than not that no amount
will be payable under the arrangement. However, this estimate is
subject to change depending on the probability of the counterparty
claiming under the guarantee which is a function of the likelihood
that the financial receivables held by the counterparty which are
guaranteed suffer credit losses.
17. derivative financial instruments
GROUP 2012
GBP
Financial liabilities carried at fair value through
profit or loss (FVTPL) 1,525,391
COMPANY 2012
GBP
Financial liabilities carried at fair value through
profit or loss (FVTPL) 541,598
Further details of these derivative financial instruments
related to the bonds are provided in notes 16 and 25.
18. commitments
IDC Loan
On 20 September 2012, Lace Diamond Mine (Pty) Ltd ("Lace"),
wholly-owned subsidiary of the Company, entered into an agreement
with the Industrial Development Corporation of South Africa Limited
("IDC") whereby IDC will provide a project loan facility of R
220,000,000. The term of the loan is 7 years with an interest rate
of South Africa Prime Rate + 2%. The initial drawdown must occur
before 31 July 2014 and interest from the initial drawdown date
will be capitalised for two years, subject to a maximum of R
20,141,000 and thereafter is payable semi-annually in arrears. The
loan is repayable in 10 bi-annual payments of R 24,014,000
commencing on the date that is 2 years after the initial drawdown
date and every six months thereafter. The IDC Loan is secured by a
general charge over the assets of Lace. In addition there is a
cession in favour of IDC of shares held by Lace's shareholders and
of loans to Lace by shareholders and associated companies. The
initial drawdown is conditional on R 100,000,000 having been
advanced to Lace by shareholders and associated companies after 20
September 2012.
19. deferred tax
Until it is probable that sufficient taxable profits will be
available to allow the entire or partial recovery of potential
deferred tax assets of GBP5,458,225 (2011 - GBP4,847,154), the
accounting benefit of tax losses will not be reflected in the
accounts. The Group's tax losses have no expiry date.
Due to the Group's retained loss position, there are no
temporary differences associated with investments in the Group's
subsidiaries.
20. RELATED PARTY TRANSACTIONS
The Directors consider that there is no ultimate controlling
party of the Company. Transactions between the Company and its
subsidiaries, which are related parties of the Company have been
disclosed in the Company section of this note.
The Directors are considered to be the key personnel of the
Group and therefore all transactions with such individuals have
been disclosed below and in the audited section of the remuneration
report.
Details of transactions between the Group and other related
parties are disclosed below.
During the year ended 31 December 2012:
(i) GBP131,458 (2011 - GBP92,667) were paid to the following
companies as Directors' remuneration:
20. RELATED PARTY TRANSACTIONS (continued)
- GBP91,458 to Glendree Capital Management Limited (2011 -
GBP60,000), a Company owned by P R Loudon;
- GBP20,000 to Loeb Aron & Company Limited (2011 -
GBP12,000), a Company where P R Loudon and J Willis-Richards are
directors, of which GBP8,000 was paid to Loeb Aron as commission on
placing bonds and GBP12,000 as non-executive directors fees for Mr
Willis-Richards. In addition, Loeb Aron subscribed to GBP50,000 of
the UK Bonds (see note 16).
- GBP20,000 to European Islamic Investment Bank plc (2011 -
GBP20,667), represented on the Company's Board of Directors by M
Toxvaerd (appointed 1 May 2012) and G K Morton and S Benkhadra
(resigned 19 September 2011) in 2011;
(ii) During 2012, Mr Worthington made a loan to the Company of
GBP150,000 bearing cumulative interest at 1% per month. On 14
December 2012, GBP100,000 of the loan was settled by the Company
through the issuance of GBP100,000 of convertible bonds (see
below). At 31 December 2012, the amount owing to Mr Worthington,
including interest, amounted to GBP68,485, of which GBP18,485
constitutes interest.
(iii) During 2012, Messrs Worthington and Loudon both
participated in the UK Bond placement (note 16), each taking up
GBP100,000 in bonds. In consideration Mr Loudon waived outstanding
remuneration owing to him of the same amount.
COMPANY
The Company held a loan to Diamondcorp Holdings Limited of
GBP23,553,845 (2011 - GBP22,802,199).
The Company has provided a financial guarantee to the
Bondholders of the SA Bond, guaranteeing any amounts due under the
SA Bond agreement by its wholly-owned subsidiary, Soapstone
Investments (Pty) Ltd. See note 16 for further details.
21. SHARE CAPITAL
2012 2011
No. GBP No. GBP
Called up, allotted and fully paid
Ordinary shares of 3 pence each 270,839,478 8,125,184 242,268,048 7,268,041
In June 2011, the Company issued 26,794,397 ordinary shares at
13 pence each. The cost associated with the issuance of these
shares has been charged to the share premium account.
In October 2011, the Company issued 31,600,000 ordinary shares
at 6.5 pence each. The cost associated with the issuance of these
shares has been charged to the share premium account.
In October 2012, the Company issued 28,571,430 ordinary shares
at 3.5 pence each. The cost associated with the issuance of these
shares has been charged to the share premium account.
22. warrant reserve
Warrants Warrant
in issue reserve
GBP
GROUP AND COMPANY
Outstanding at 1 January 2012 5,816,666 505,877
Granted during the year 5,000,000 92,000
Expired during the year (5,816,666) (505,877)
Outstanding at 31 December 2012 5,000,000 92,000
GROUP AND COMPANY
Outstanding at 1 January 2011 and
31 December 2011 5,816,666 505,877
(i) Vendor Warrants
The vendors of Crown Diamond Mining Limited (which changed its
name to Diamondcorp Holdings Limited in 2007) were entitled to be
issued on completion of the sale of its ordinary share capital to
the Company with a total of 4,166,666 warrants to subscribe for
ordinary shares of 3 pence each at a price of the lower of 180
pence or price at which the Company raises equity finance on
admission to the Alternative Investment Market (90 pence). These
warrants expired on 1 February 2012, being five years from the date
of admission to the Alternative Investment Market. Certificates in
relation to these warrants were issued on 30 June 2006 following
and taking into account, the consolidation of the Company's share
capital on that date.
These warrants were valued by the Directors using the
Black-Scholes valuation model, based on the assumptions as detailed
below.
(ii) AOF Warrants
In 2008 a warrant was issued to Africa Opportunity Fund to
subscribe for 1,650,000 ordinary shares of 3 pence each,
exercisable at 21.6 pence for a period ended on 25 January 2012.
These warrants were not exercised and have now expired.
These warrants were valued by the Directors using the
Black-Scholes valuation model, based on the assumptions as detailed
below.
(iii) Darwin Warrants
In respect of agreeing to provide a standby equity finance
facility of up to GBP10,000,000 which can be drawn upon at the
Company's discretion during a period of 36 months ending on 18
October 2015, the Company has granted 5,000,000 warrants to Darwin
Strategic Limited a unit of Henderson Global Investors which are
exercisable at 9p on or before 18 October 2015.
Black-Scholes Assumptions Vendor AOF Warrants Darwin
Warrants* Warrants
Term range 5.6 years 0.5 years 3 years
Expected dividend yield Nil Nil Nil
Risk free interest rate 5 % 2 % 1.4 %
Share price volatility 55 % 40 % 100 %
Share price at time of grant 45 pence 56.5 pence 4 pence
* These warrants were subject to the share consolidation on 30
June 2006.
23. non controlling interest
GBP
GROUP
Balance at 1 January 2011 (411,437)
Share of total comprehensive loss for the
year (415,560)
Currency translation loss 138,794
Balance at 1 January 2012 (688,203)
Share of total comprehensive loss for the
year (518,325)
Currency translation gain 102,274
Balance at 31 December 2012 (1,104,254)
24. share based payments
Equity-settled share option scheme
The Company has a share option scheme for all employees of the
Group. Options are exercisable at a price equal to the average
quoted market price of the Company's shares on the date of grant.
The vesting period is three years. If the options remain
unexercised after a period of ten years from the date of grant the
options expire. Options are generally forfeited if the employee
leaves the Group before the options vest.
Details of the share options outstanding during the year are as
follows.
2012 Number 2011
Weighted of share Weighted
average options average
Number exercise exercise
of share price price
options (GBP) (GBP)
Outstanding at beginning of year 6,345,000 19p 6,595,000 55p
Granted during the year - -
Forfeited during the year - (250,000)
Exercised during the year - -
Expired during the year - -
Outstanding at the end of the year 6,345,000 15p 6,345,000 19p
Exercisable at the end of the year 5,125,000 21p 3,838,333 24p
At 31 December 2012, 6,345,000 options were outstanding at a
weighted average exercise price of 15p, and a weighted average
remaining contractual life of 6.5 years.
During 2012, the Group recognised total expenses of GBP10,170
(2011 - GBP26,483) relating to equity-settled share-based payment
transactions.
24. Share based payments(continued)
Equity-settled share option scheme (continued)
Black-Scholes Assumptions 2010 2007 The DiamondCorp
Option UK Option Share Option
Plan Plan Plan
Term range 3 years 3 years 3 years
Expected dividend yield Nil Nil Nil
Risk free interest rate 2% 5 % 2 %
Share price volatility 50% 40 % 40 %
Share price at time of grant 6.88 pence 90 pence 34.5 pence
(i) 2007 UK Options ("2007 Plan")
During 2007, options over 2,940,000 ordinary shares of 3 pence
each were granted to employees and management of the Company,
exercisable at 135 pence for a period of 10 years from the date of
issue.
270,000 of these options vested on grant and the balance vest
over 3 years at one-third at each anniversary of the issue date.
690,000 of these options were forfeited during 2008 by reason of
retirement and 120,000
options were forfeited in 2009.
Share options granted during the year ended 31 December 2007
were valued by the Directors using the Black-Scholes valuation
model, based upon the assumptions as detailed in the table
above:
At 31 December 2012, 2,130,000 options were outstanding under
this plan (2011 - 2,130,000).
(ii) The DiamondCorp Share Option Plan ("DCP Plan")
During 2008, a share option plan was approved and registered in
the Republic of South Africa to provide eligible employees of the
Group with the opportunity to acquire as incentive an interest in
the equity of the Company. Eligible employees were granted options
over 695,000 ordinary shares of 3 pence each, exercisable at 50
pence for a period of 10 years from the date of issue, 16 December
2008. These options vest over 3 years at one-third at each
anniversary of the issue date. During 2009, a further 200,000
options were granted under this plan and 340,000 options were
forfeited.
These options were valued by the Directors using the
Black-Scholes valuation model, based upon the assumptions as
detailed in the table above.
In August 2010, the exercise price of these options was adjusted
to 21 pence. All other conditions remain unchanged.
At 31 December 2012, the number of options outstanding under
this plan was 555,000 (2011 - 555,000).
(iii) 2010 Option Plan ("2010 Plan")
During 2010, options over 4,570,000 ordinary shares of 3 pence
each were granted to employees and management of the Company,
exercisable at 12 pence each for a period of 10 years from the date
of issue. These options vest over 3 years at one third on each
anniversary of the date of issue, subject to the share price of the
Company attaining and trading at or above 17 pence for a period of
3 consecutive months.
These options were valued by the Directors using the
Black-Scholes valuation model, based upon the assumptions as
detailed below. As the fair value of these options is not material
to the financial statements, the Directors did not consider it
necessary to incur the additional expense required to employ a
third party to calculate the fair value of the options using the
Monte Carlo Method.
During the year ended 31 December 2010, 660,000 options
expired.
During the year ended 31 December 2011, 250,000 options
expired.
During 2012 the exercise price of these options was adjusted to
5 pence. All other conditions remain unchanged.
24. Share based payments(continued)
(iii) 2010 Option Plan ("2010 Plan") (continued)
At 31 December 2012, 3,660,000 options were outstanding under
this plan (2011 - 3,660,000).
25. Financial Instruments
GROUP AND COMPANY
Capital risk management
The Group manages its capital to ensure that entities in the
Group will be able to continue as going concerns while maximising
the return to stakeholders through the optimisation of the debt and
equity balance. The capital structure of the Group consists of
debt, which includes the borrowings disclosed in note 14, cash and
cash equivalents (note 13) and equity attributable to equity
holders of the parent, comprising issued capital, reserves and
retained earnings. The Group is not subject to any externally
imposed capital requirements. The Group's Directors review the
capital structure on a regular basis. As part of this review the
Directors consider the cost of capital and the risks associated
with each class of capital.
Significant accounting policies
Details of the significant accounting policies and methods
adopted, including the criteria for recognition, the basis of
measurement and the basis on which income and expenses are
recognised, in respect of each class of financial asset, financial
liability and equity instrument are disclosed in note 1 to the
financial statements.
Categories of financial instruments
Group Company
Carrying value Carrying value
2012 2011 2012 2011
GBP GBP GBP GBP
Financial assets
Loans and receivables (including
cash and cash equivalents) 287,060 2,632,760 23,716,556 23,092,106
Financial liabilities
Amortised cost 3,476,725 498,876 1,023,680 118,580
Financial guarantee contracts - - 455,000 -
Derivative instruments designated
as fair value through profit and
loss (FVPL) 1,525,391 - 541,598 -
The Directors consider that the carrying amounts of financial
assets and financial liabilities recorded at amortised cost in the
financial statements approximate their fair values.
Valuation techniques and assumptions applied for the purposes of
measuring fair value
The fair values of derivative instruments are calculated using
quoted prices. Where such prices are not available, a discounted
cash flow analysis is performed using the applicable yield curve
for the duration of the instruments for non-optional derivatives,
and option pricing models for optional derivatives. The fair value
of the embedded derivative component of the convertible bonds was
determined using the Black Scholes (using the Barone-Adesi and
Whaley approximation technique) option pricing model. The table
below outlines the fair value inputs used in the embedded
derivative valuation.
Black-Scholes Assumptions 31 December 14 December
2012 2012
Term range 6 years 6 years
Expected dividend yield Nil Nil
Risk free interest rate 1.4 % 1.4 %
Share price volatility 96 % 96 %
Share price at time of valuation 3.9 pence 3.8 pence
25. Financial Instruments (CONTINUED)
The embedded derivative component of the convertible bonds is
deemed to represent a Level 2 fair value instrument in the fair
value hierarchy.
-- Level 1 fair value measurements are those derived from quoted
prices (unadjusted) in active markets for identical assets or
liabilities;
-- Level 2 fair value measurements are those derived from inputs
other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly (i.e. as
prices) or indirectly (i.e. derived from prices); and
-- Level 3 fair value measurements are those derived from
valuation techniques that include inputs for the asset or liability
that are not based on observable market data (unobservable
inputs).
Financial risk management objectives
The Group's financial function provides services to the
business, monitors and manages the financial risks relating to the
operations of the Group. These risks include market risk (including
currency risk, fair value interest rate risk and price risk),
credit risk, liquidity risk and cash flow interest rate risk.
The Group does not enter into or trade financial instruments,
including derivative financial instruments, for any purpose.
Market risk
The Group's activities expose it primarily to the financial
risks of changes in foreign currency exchange rates. There has been
no change to the Group's exposure to market risks or the manner in
which it is measured and managed.
Credit risk management
The Group and Company's principal financial assets are bank
balances and cash. The credit risk on liquid funds is limited
because the counterparties are banks with high credit-ratings
assigned by international credit-rating agencies. Management
reviews the credit worthiness of all customers before entering into
a transaction.
The Company also holds amounts receivable from related parties
as disclosed in note 20. Management reviews the credit worthiness
of all balances due from related parties with reference to future
profitability.
Foreign currency risk management
The Group undertakes certain transactions denominated in foreign
currencies. Hence, exposures to exchange rate fluctuations
arise.
The carrying amounts of the Group's and Company's foreign
currency denominated monetary assets and monetary liabilities at
the reporting date are as follows:
Assets (Liabilities)
2012 2011
GBP GBP
Cash denominated in South African
Rand 2,958,573 371,924
Cash denominated in United States
Dollar - 661,171
Loan denominated in United States
Dollar - (2,165,762)
Foreign currency sensitivity analysis
The Group is exposed to the currency of South Africa (Rand) and
the United States Dollar.
The following table details the Group's sensitivity to a 20%
increase and decrease in the Sterling against South African Rand
and United States Dollar. 20% is the sensitivity rate used when
reporting foreign currency risk internally to key management
personnel and represents management's assessment of the reasonably
possible change in foreign exchange rates. The sensitivity analysis
includes only outstanding foreign currency denominated monetary
items and adjusts their translation at the period end for a 20%
change in foreign currency rates. A negative number below indicates
a decrease in profit where the Sterling strengthens 20%
25. Financial Instruments (continued)
Foreign currency sensitivity analysis (continued)
against the relevant currency. For a 20% weakening of the
Sterling against the relevant currency, there would be an equal and
opposite impact on the profit and the balances below would be
positive.
Rand currency
impact
2012 2011
GBP GBP
Loss due to a 20% depreciation of
the ZAR (390) -
Profit due to a 20% appreciation
of the ZAR 586 -
The Group's sensitivity to foreign currency has increased during
the current period, because the Company held higher balances of
foreign currency. However, the Group's South African Rand deposits
are held at a subsidiary level in South Africa and as such this
sensitivity analysis does not represent a real cash foreign
exchange risk to the Group.
In management's opinion, the impact of the sensitivity analysis
is representative of the inherent foreign exchange risk.
Liquidity risk management
Ultimate responsibility for liquidity risk management rests with
the Board of Directors, which has built an appropriate liquidity
risk management framework for the management of the Group's short
term funding and liquidity management requirements. The Group
manages liquidity risk by maintaining adequate reserves, by
continuously monitoring forecast and actual cash flows and matching
the maturity profiles of financial assets and liabilities.
Interest rate risk management
The Group is exposed to interest rate risk because entities in
the Group borrow funds at both fixed and floating interest rates.
The risk is managed by the Group by maintaining an appropriate mix
between fixed and floating rate borrowings, and by the use of
interest rate swap contracts and forward interest rate contracts.
Hedging activities are evaluated regularly to align with interest
rate views and defined risk appetite; ensuring the most
cost-effective hedging strategies are applied.
The Group's exposure to interest rates on financial assets and
financial liabilities are detailed in the liquidity risk management
section of this note.
Liquidity and interest risk tables
The following table details the Group's remaining contractual
maturity for its non-derivative financial liabilities. The tables
have been drawn up based on the undiscounted cash flows of
financial liabilities based on the earliest date on which the Group
can be required to pay. The table includes the principal cash flows
all of which are due within less than one year.
In respect of the financial liability and the financial
guarantee contract liability (Company only), the terms on which
those instruments might be required to be settled are outlined in
note 16. The amounts outlined below in respect of these financial
instruments represent the amortised cost financial liability and
the fair value financial guarantee contract which are currently
repayable on demand and disclosed as current liabilities in the
balance sheet of the Group and the Company.
25. FINANCIAL INSTRUMENTS (continued)
GROUP
Weighted average Less
effective than
interest rate 1 year
% GBP
2012
Non-interest bearing - 486,004
Finance lease liability - -
Fixed interest rate instruments 13.9% 2,711,224
3,197,228
2011
Non-interest bearing - 369,217
Finance lease liability - -
Fixed interest rate instruments - -
369,217
COMPANY
Weighted average Less
effective than
interest rate 1 year
% GBP
2012
Non-interest bearing - 56,051
Fixed interest rate instruments 13.8% 848,746
Financial guarantee contract 455,000
1,359,797
2011
Non-interest bearing - 43,703
Fixed interest rate instruments - -
43,703
The following table details the Group's and Company's expected
maturity for its non-derivative financial assets. The tables below
have been drawn up based on the undiscounted contractual maturities
of the financial assets including interest that will be earned on
those assets.
Group Company
Weighted Weighted
average average
effective effective
interest Less than interest Less than
rate 1 month rate 1 month
% GBP % GBP
2012
Non-interest bearing - 187,060 - 153,545
2011
Non-interest bearing - 2,632,760 - 257,042
26. SUBSIDIARIES
Details of the Company's subsidiaries at 31 December 2012 were
as follows:
Name of subsidiary Place of Proportion Proportion Principal activity
incorporation of ownership of voting
(or registration) interest power held
and operation % %
Holding Company
Diamondcorp Holdings British Virgin of a Trading
Limited (1) Islands 100 100 Group
Botswana Diamondcorp British Virgin
Limited Islands 100 100 Holding Company
Republic
Lace Diamond Mine of Diamond exploration
(Pty) Limited South Africa 74 74 and exploitation
Republic
Soapstone Investments of South
(Pty) Limited Africa 100 100 Investment Company
DCP Exploration (Pty) Diamond exploration
Ltd Botswana 100 100 and exploitation
(1) Formerly named Crown Diamond Mining Limited
27. SUBSEQUENT EVENTS
(i) On 7 January 2013 Diamondcorp Holdings Limited, a
wholly-owned subsidiary of the Company, entered into a term loan
agreement with Laurelton Diamonds, Inc., a wholly-owned subsidiary
of Tiffany & Co, in the amount of US$6,000,000 (the "Loan") in
exchange for an Off-take Agreement. The Loan has been drawn down in
two instalments of US$3,000,000 each on 10 January 2013 and 10
April 2013. The Loan bears interest at 9%, and is repayable in full
by 10 April 2021. There will be no payments of principal or
interest for the first 3 years of the Loan with accrued interest
being added to the principal balance of the Loan. A blended payment
of principal and interest in the amount of US$1,575,963 is due on
10 April 2017 and every anniversary thereafter until payment in
full has been made. The Loan can be repaid early without
penalty.
The Off-take Agreement over Lace Mine production takes effect
from 10 January 2013 until the end of the life of the mine. Subject
to any purchases by the South African State Diamond Trader, the
Off-take Agreement will give Laurelton Diamonds, Inc. the right to
purchase, on commercial terms related to fair market value,
production from the Lace Mine that meets the quality and colour
standards of Laurelton.
The Competent Person responsible for the technical information
contained in this announcement is Mr Paul Zweistra (Pr. Sci. Nat.,
Registration number 400016/93) a full-time employee of VP3
Geoservices (Pty) Ltd. VP3 and Mr Zweistra have reviewed the
information contained herein and approved the contents of this
press release.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR GGUUPAUPWGQU
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