RNS Number:5322C
KimCor Diamonds plc
21 August 2007
21 AUGUST 2007
KIMCOR DIAMONDS
(AIM:KIM)
PRELIMINARY RESULTS
FOR THE YEAR ENDING 31 MARCH 2007
AND
PROPOSED ACQUISITION OF DWYKA HOLDINGS LIMITED
KimCor Diamonds plc ("KimCor" or the "Company"), the diamond producing and
exploration company with properties in South Africa, is pleased to announce its
preliminary results for the period ending 31 March 2007 and the proposed
acquisition of Dwyka Holdings Limited.
OPERATIONAL HIGHLIGHTS
* Reduced operational costs at Bellsbank as a result of new conveyor and
mining policy;
* Processing rates to double to approximately 1.4 million tonnes per annum;
* Final diamond recovery and security to be improved;
* Drill programme planned at Koffiefontein;
* Opportunity to generate substantially more stones suitable for
beneficiation; and
* Losses of #1.5m (2006 loss #679,000).
ACQUISITION HIGHLIGHTS
* Proposed acquisition of the diamond and industrial operations of Dwyka
Resources Limited (AIM: DWY) for #8.73m;
* Acquisition will transform the Company from a small-scale producer to a
multi-mine operation that has the scope to become a mid-tier producer of
diamonds;
* Expanded asset base will allow the Company to maintain its primary focus
as a diamond producer and benefit from a number of synergies that exist
within the expanded group; and
* Proposed placing of shares at 6.5p to raise #3.5m net of expenses.
Commenting on today's results, Martyn Churchouse, CEO of KimCor, said: "I am
pleased to announce both KimCor's preliminary results and its entry into a
conditional agreement for the acquisition of Dwyka Resources Limited's diamond
and industrial assets.
"I am confident as to the success and growth of the Company over the coming
year, and the proposed Dwyka acquisition represents a significant step in
KimCor's acquisition strategy while it also demonstrates our commitment to
establish the Company as a mid-tier low cost diamond producer."
Enquiries:
KimCor Diamonds plc Tel: 020 7290 1400
Martyn Churchouse
www.kimcordiamonds.com
Strand Partners LLP Tel: 020 7409 3494
Simon Raggett
Warren Pearce
Victoria Milne-Taylor
Bishopsgate Communications Ltd Tel: 020 7562 3350
Maxine Barnes
Nick Rome
CHAIRMAN'S STATEMENT
I am pleased to report to our shareholders on the progress made by KimCor during
the past financial year.
New Acquisitions
The Company informed shareholders at the time of listing that it intended to
acquire further diamond assets as part of its medium and long-term growth
strategy. It has also become obvious to the Board that consolidation in the
diamond sector is both inevitable and necessary and we fully expect our
pro-active approach in this regard to add shareholder value.
The proposed acquisition of the diamond assets of Dwyka Resources Limited, a
company listed on the AIM (DWY) and ASX, through the purchase of Dwyka Holdings
Limited ("DDH") to form an "Enlarged Group" will transform the Company from a
small-scale producer to a multi-mine operation that has the scope to become a
mid-tier producer of diamonds.
Completion of acquisition of DDH is conditional upon
(i) the approval of the Company's shareholders in general meeting
(including a waiver of Rule 9 of the City Code on Takeovers and Mergers);
(ii) the approval of Dwyka Resources Limited' shareholders in
accordance with the rules of the ASX;
(iii) the placing agreement between the Company, Strand Partners
Limited and Ambrian Partners Limited becoming unconditional in all respects; and
(iv) admission of the Enlarged Group to trading on the AIM occurring by
8.00 am on 21 September 2007 (or such later date as the parties agree being no
later than 12 October 2007).
KimCor has established a strategy for the development, re-organisation and
management of the DDH assets specifically aimed at increasing diamond production
through the expansion of existing processing plants and improving their
efficiency.
Mining and Production
During the year, processing rates and diamond production at Bellsbank have been
hampered by a shortage of water. The successful conclusion of a water supply
agreement with a neighbouring producer has resolved this matter and provided
sufficient water to allow the Board to approve the implementation of an
expansion programme for the second half of 2007. This will involve the
installation of a Dense Media Separation Unit ("DMS") and a pre-concentration
plant which has the potential to enable Bellsbank to double processing rates to
approximately 1.4 million tonnes per annum.
A new mining strategy was implemented at Bellsbank during the year in response
to the fact that the feed grade from the dumps was lower than anticipated in the
original (2005) Competent Persons Report produced by AMEC. Under the new
strategy, the reduced operating costs allow the mine to process tailings feed
profitably at a recoverable grade of between 4.0 and 4.3cpht.With the
installation of the DMS unit, the mine can expect to improve recovered grades
further as recoveries from the DMS are generally expected to exceed those
achievable from conventional pans. In addition, as part of the programme to be
adopted by the Enlarged Group, Bellsbank will cease final recovery of diamond
production on site and, instead, transport its' concentrates to Kimberley, where
the material will be processed by X-ray recovery using a Flowsort. This is
expected to further improve final diamond recovery and security.
Future outlook
Initiatives at Bellsbank will be undertaken in parallel with capital improvement
programmes planned for some of the DDH assets following the completion of the
DDH acquisition.
The DDH assets will provide an opportunity to combine the production of diamonds
from underground, dump and alluvial sources.
We also intend to capitalise on the expertise of Anmic, the cutting and
polishing business in which KimCor holds a 50 per cent equity stake, to cut and
polish a proportion of diamond production. The Board is of the opinion that
based on DDH's historic production, a much higher percentage of larger stones
conducive to the value added process will be available to the Company going
forward.
On completion of the acquisition of DDH, Melissa Sturgess, the current chief
executive officer of Dwyka Resources, will be appointed as non-executive
chairman of KimCor in addition to her role at Dwyka Resources Limited. Cedric
Bredenkamp, the current managing director of the South African diamond
operations of Dwyka Resources Limited, will be appointed as managing director of
KimCor, reporting directly to the chief executive officer.
Finally, I would like to thank all the staff of the Company for their commitment
to the implementation of the new mining regime and the successful completion of
the first step in our acquisition strategy.
Gordon P Riddler
Chairman
REVIEW OF OPERATIONS
2007 proved to be the year of particular significance for the Group in light of
the new opportunities presented by the proposed acquisition of DDH.
Acquisition of DDH
The acquisition of DDH will transform the KimCor portfolio by adding two
producing underground mines, a second tailing reclamation operation, an alluvial
mine and a number of advanced exploration properties.
The expanded asset base will allow the Company to maintain its primary focus as
a diamond producer and benefit from a number of synergies that exist within the
expanded group.
Bellsbank production
The Bellsbank dump mining operation has been severely hampered by a shortage of
water for processing. This shortage not only limited production rates, but also
prevented the Company from implementing a programme of expansion. In June 2007
an agreement was signed with a neighbouring mining company which secured
sufficient water to allow the plant to operate at capacity and for the planned
expansion to commence.
During the period of reduced production, mine management sought ways to reduce
costs and improve both the productivity and efficiency of the operation. As a
result, a new operating strategy was implemented in the second quarter of 2007
that addressed the critical areas of the operation, namely, contract mining
costs, ore selection, tailings waste disposal, plant capacity and recovery. Each
of these aspects have been tackled and new measures implemented.
Contract mining
A new contract mining agreement was signed reducing the cost per tonne for
tailings delivered to the plant and allowing for a substantial saving to be made
through the introduction of a new waste disposal method.
Ore selection and economies of scale
A detailed study of the numerous dumps present within the license area revealed
in excess of 12 different generations of tailing material showing diverse
characteristics reflecting 60 years of mining from different sources and
different processing techniques. Many of these dumps are too small to warrant
bulk sampling for the purpose of estimating recoverable diamond grade.
Dumps comprise as many as four generations of tailing material deposited either
randomly or in layers made up of different aged tailings mixed with a waste
component.
Analysis of the cost of segregating ore and waste demonstrated that the heavy
plant and manpower associated with this process could not be justified. As a
result, a new mining regime was applied during mid-April 2007, whereby all
tailing material is mined and processed regardless of its characteristics.
Tailings waste disposal
A new waste tailing conveyor system was designed and constructed that discharges
waste tailing material directly from the site to a disposal site without any
need for the previous truck haulage. As a result, it has been possible to amend
the existing agreement with the mining contractor and achieve significant cost
reductions.
Approximately 70 per cent. of the total feed input to the plant reports as a
coarse waste tail product. Previously, this waste was removed from the plant
site by the mining contractor, incurring both a fixed rate charge per tonne plus
a fuel charge. The new conveyor, together with the savings resulting from the
new mining policy (and reduced reliance on contracted heavy plant and
equipment), has resulted in a lowering of the operating cost.
Plant capacity
Plans have been approved for the installation of an eight tonne per hour Dense
Media Separation plant that will be integrated into the existing facility,
allowing production rates to increase to approximately 79,000 tonnes per month.
In addition, plans have been approved for a stand-alone pre-concentration unit
designed to process approximately 80 tonnes of tailings per hour, or an
estimated 45,000 tonnes per month. These new additions are planned to be
installed in the second half of 2007, and result in a processing rate of
approximately 1.4 million tonnes per annum.
The implementation of the new measures is expected to reduce the life of the
Bellsbank operation to 3 years.
Koffiefontein exploration
Exploration results at Koffiefontein have been encouraging and assessment of the
numerous geophysical targets identified has been started.
A drill programme has been planned to test the extent of the kimberlite
delineated on the farm called Nooitgedacht.
Anmic
During the year 141 carats were cut and polished representing 3% of total
production. As expected the opportunities for beneficiation of diamond
production from the Bellsbank tailing operation have been limited as large
stones from tailings are not common. However, with the addition of the
Blaauwbosch and Newlands underground mines and the Nooitgedacht alluvial
operation, there is ample opportunity to generate substantially more stones
suitable for beneficiation and the creation of additional value for
shareholders.
Results from operations
The Group generated a loss for the year of #1,520,892 compared to a loss of
#678,622 in the previous period. The loss per share for the year ended 31 March
2007 was 2.37 pence compared with loss per share of 2.07 pence for 2006.
Martyn Churchouse
Chief Executive Officer
Consolidated income statement for the year ended 31 March 2007
Year Ended 31 Period From
March 2007 incorporation to
31
March 2006
# #
Revenue 200,480 33,080
Other operating income 4,994 260,883
Mining and treatment plant expenses (175,922) -
Employee benefits expense (612,743) (52,933)
Depreciation and amortisation expense (142,466) (276)
Other expenses (855,651) (908,516)
-------- --------
Loss from operations (1,581,308) (667,762)
Finance expense (5,778) (1,181)
Finance income 50,604 4,003
-------- --------
Loss for the period before taxation (1,536,482) (664,940)
Tax 15,590 (13,682)
-------- --------
Loss for the period after taxation (1,520,892) (678,622)
attributable to equity holders of the
parent
-------- --------
Basic and diluted loss per share 3 (2.37)p (2.07)p
-------- --------
All amounts relate to continuing activities.
Consolidated Balance sheet as at 31 March 2007
31 March 2007 31 March 2006
# #
ASSETS
Non - current assets
Property, plant and equipment 562,331 240,663
Mining properties 1,844,171 2,033,837
Goodwill 99,972 -
Prospecting rights 113,032 -
Other non-current receivables 6,984 9,355
-------- --------
2,626,490 2,283,855
-------- --------
Current assets
Inventories 35,982 -
Trade and other receivables 107,761 121,897
Cash and cash equivalents 519,947 2,533,137
-------- --------
663,690 2,655,034
-------- --------
Total assets 3,290,180 4,938,889
-------- --------
EQUITY AND LIABILITIES
Liabilities
Current liabilities
Trade and other payables 128,465 237,399
Current tax payable 10,215 13,682
Accruals 81,144 88,779
-------- --------
219,824 339,860
-------- --------
Non-Current liabilities
Deferred tax liability 433,156 448,746
-------- --------
433,156 448,746
-------- --------
Total liabilities 652,980 788,606
-------- --------
Equity attributable to equity holders of the
parent
Share capital 321,567 317,400
Share premium reserve 3,571,832 3,411,416
Foreign exchange reserve (270,391) 43,028
Merger reserve 935,000 935,000
Warrant reserve 103,267 111,600
Retained earnings (2,038,653) (668,161)
-------- --------
Equity attributable to shareholders of the 2,622,622 4,150,283
Company
-------- --------
Minority interests 14,578 -
-------- --------
Total equity 2,637,200 4,150,283
-------- --------
Total equity and liabilities 3,290,180 4,938,889
-------- --------
Consolidated Statement of Changes in Equity for the period ended 31 March 2007
Total
Retained attributable
earnings Foreign to equity
Share Share Warrant Merger and other exchange holders of Minority Total
capital premium reserve reserve reserves reserve the parent interest equity
# # # # # # # # #
Balance on
incorporation - - - - - - - - -
Issue of share 317,400 3,755,100 - 935,000 - - 5,007,500 - 5,007,500
capital
Issue of - - 111,600 - - - 111,600 - 111,600
warrants
Issue costs - (343,684) - - - - (343,684) - (343,684)
Equity settled
share-
based payments - - - - 10,461 - 10,461 - 10,461
Foreign
exchange on
translation of
foreign
operations - - - - - 43,028 43,028 - 43,028
Net income
recognised
directly
in equity - - - - - 43,028 43,028 - 43,028
Net loss for
the
period - - - - (678,622) - (678,622) - (678,622)
Total
recognised
income and
expense
for the period - - - - (678,622) 43,028 (635,594) - (635,594)
Balance as of
1 April 2006 317,400 3,411,416 111,600 935,000 (668,161) 43,028 4,150,283 - 4,150,283
Issue of share
capital 4,167 152,083 - - - - 156,250 - 156,250
Exercise of
warrants - 8,333 (8,333) - - - - - -
Equity settled
share-
based payments - - - - 150,400 - 150,400 - 150,400
Foreign
exchange on
translation of
foreign
operations - - - - - (313,419) (313,419) - (313,419)
Net loss
recognised
directly in
equity - - - - - (313,419) (313,419) - (313,419)
Net loss for
the year - - - - (1,520,892) - (1,520,892) - (1,520,892)
Total
recognised
income and
expense
for the year - - - - (1,520,892) (313,419) (1,834,311) - (1,834,311)
Minority
interest due
to acquisitions
of
subsidiary - - - - - - - 14,578 14,578
Balance as of
31
March 2007 321,567 3,571,832 103,267 935,000 (2,038,653) (270,391) 2,622,622 14,578 2,637,200
Consolidated Cash Flow Statement for the period ended 31 March 2007
Year Ended 31 March Period From
2007 incorporation to 31
March 2006
# #
CASH FLOW FROM OPERATING ACTIVITIES
Loss before tax (1,536,482) (664,940)
Adjustments for:
Finance expense 5,778 1,181
Finance income (50,604) (4,003)
Depreciation and amortisation 142,272 276
Income received resulting from the loan waiver - (260,069)
Equity settled share-based payment expense 150,400 10,461
Foreign exchange difference (90,653) 6,963
Net cash from operating activities
before changes in working capital (1,379,289) (910,131)
(Decrease)/ increase in trade and other payables (120,036) 326,178
Decrease/(increase) in trade and other receivables 16,508 (111,487)
Increase in inventories (35,982) -
Net cash flow from operating activities (1,518,799) (695,440)
INVESTING ACTIVITIES
Purchase of property, plant and equipment (485,747) (166,666)
Purchase of prospecting rights (113,032) -
Loan issued to subsidiary before acquisition (3,500) (400,000)
Acquisition of subsidiary, gross of cash acquired (95,000) -
Interest received 50,604 4,003
Cash held in subsidiary at the date of acquisition 1,812 37,005
Net cash flow from investing activities (644,863) (525,658)
FINANCING ACTIVITIES
Proceeds from issue of ordinary shares 156,250 3,987,500
Proceeds from issue of warrants - 111,600
Issue costs - (343,684)
Proceeds from loans raised - 60,000
Re-payment of loan - (60,000)
Interest paid (5,778) (1,181)
Net cash from financing activities 150,472 3,754,235
Net (decrease)/increase in cash and cash equivalents (2,013,190) 2,533,137
Cash and cash equivalents at the beginning of the year/period 2,533,137 -
Cash and cash equivalents at the end of the year/period 519,947 2,533,137
NOTES:
1. The financial information for the year ended 31 March 2007 is audited and
was approved by the Board of Directors on 21 August 2007. The audited group
financial information incorporates the audited financial information of the
Company and all its subsidiaries for the financial year ended 31 March 2007.
2. The financial information set out above does not constitute the Group's
statutory accounts for the year ended 31 March 2007 but is derived from these
accounts. Statutory accounts for the year ended 31 March 2007 will be delivered
to the Registrar of Companies in England and Wales following the Company's
annual general meeting. The auditors have reported on these accounts; their
reports were unqualified but with emphasis of matter relating to going concern
and did not contain statements under the Companies Act 1985, s237(2) or (3).
The figures included in this announcement have been prepared on the basis of the
accounting policies as set out in the statutory accounts for the year ended 31
March 2007.
3. Basic and Diluted loss per share
Basic loss per share amounts are calculated by dividing net loss for the period,
attributable to ordinary equity holders of the parent, by the weighted average
number of ordinary shares outstanding during the period.
The following reflects the income and share data used in the basic and diluted
earnings per share computations:
Net loss attributable to equity holders of the parent #1,520,892
No diluted loss per share has been calculated as the Group has incurred a loss
for the period.
Basic weighted average number of shares (excluding treasury shares) was
64,274,520.
4. Post balance sheet events
a) An option agreement between Metal Resources and FSDM dated 20 August 2006
was extended for a further 12 months by an agreement signed on 13 July 2007. The
option period now expires on 20 August 2008.
b) On 1 June 2007, 1,439,263 ordinary shares of 0.5 pence each in the capital
of KimCor were issued and allotted to Coffee House Group. Consideration of
#125,000 was paid constituting an issue price of 8.69 pence per share, and
representing a 10% discount to the average closing market price of a KimCor
Share over the 10 days immediately preceding 11 May 2007. These shares were
admitted to trading on AIM on 7 June 2007. The total number of ordinary shares
in issue following this transaction was 65,752,596.
c) On 2 July 2007, a further 1,439,263 ordinary shares of 0.5 pence each in
the capital of KimCor were issued and allotted to Coffee House Group.
Consideration of #125,000 was paid constituting an issue price of 8.69 pence per
share, representing a 10% discount to the average closing market price of a
KimCor Share over the 10 days immediately preceding 11 May 2007.These shares
were admitted to trading on AIM on 6 July 2007.The total number of ordinary
shares in issue following this transaction was 67,191,859.
d) On 21 August 2007 the Company entered into a Conditional Sale and Purchase
Agreement ("Acquisition") with Dwyka Resources Limited relating to the
acquisition of DDH, its group and assets. The Acquisition is conditional,
amongst other things, upon consent of the KimCor and Dwyka Resources Limited
Shareholders. Please refer to the Admission document issued today and sent out
as a separate document for further details of the Acquisition and related
documentation.
Other than the above, the directors are not aware of any matter or circumstance
arising since the end of the financial year.
5. Copies of the published accounts of the Group will be sent to all
shareholders on 21 August 2007 and will be available free of charge for one
month from that date during normal business hours from the offices of KimCor
Diamonds plc at 18 Upper Brook Street, London, W1K 7PU.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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