RNS Number:3910J
Firestone Diamonds PLC
31 March 2003
Firestone Diamonds plc
Unaudited interim results for the six months to 31 December, 2002
LONDON: 31 March, 2003 - The Board of Firestone Diamonds plc, ("the Company"),
the UK-based diamond mining and exploration company, announces unaudited interim
results for the six months to 31 December, 2002.
HIGHLIGHTS
Financial
* Group production increased 23% from #445,694 to #547,000
* Rough diamond market recovered strongly in 2002 and is expected to
strengthen further
Oena Mine, South Africa
* 190% increase in production from 338 carats to 979 carats
* Average value of production of $822 per carat
* Production commences at Blokwerf terrace
Avontuur Mine, South Africa
* Production limited due to commissioning of dense media separation plant
* Average value of gem quality production of $104 per carat
Mopipi, Botswana
* Drilling programme provides evidence of a new kimberlite source in the
Mopipi region
* Joint venture discussions at advanced stage
Groen River Valley, South Africa
* Targets for the next phase of drilling and sampling selected
* Exploration acreage to double when new prospecting permits granted
New projects
* Black economic empowerment joint venture to be finalised shortly
* New mining project and three new exploration projects in Namaqualand
expected in coming year
Dear Shareholder,
The period saw continued progress in the development of Firestone's mining
operations and exploration projects. The primary focus at our mining operations
continued to be on development work at both the Avontuur and Oena Mines, with
exploration activity during the period being mainly concentrated on the Mopipi
and Groen River Valley projects. Group production increased by 23% compared to
the same period last year, with the growth primarily coming from Oena as
expected.
Negotiations are expected to be concluded in the near future with a prominent
black South African group to establish a new black economic empowerment (BEE)
joint venture company. We have also made progress in developing new projects
during the period, and expect to secure and commence work on our third mining
operation and three new exploration projects in the coming year.
Mining
Oena Mine, Namaqualand, South Africa
Continued progress was made at the Oena Mine during the period. Earthmoving and
gravel processing capacity had been significantly increased during the previous
six months through an expansion of Firestone's own capacity, as well as from the
introduction of a mining contractor, Ruslyn Mining & Plant Hire, on a
revenue-sharing basis. The impact of this capacity increase was seen during the
period, with production rising to 979 carats, a 190% increase compared to the
same period last year.
Meso gravel mining operations were carried out at the Oena terrace by Firestone
and Ruslyn Mining. Initial mining operations at the Sandberg terrace during the
previous period encountered problems due to the fact that the gravels mined were
water-saturated and had a high clay content. It was therefore decided to
relocate the mobile gravel treatment plant and field screening unit from
Sandberg to the Blokwerf terrace, which hosts more than 50% of the gravel
resources at Oena. This work was completed and the treatment plant and
screening unit were commissioned at Blokwerf by the end of the period. This
equipment will remain at Blokwerf pending the completion of an assessment of the
Sandberg gravels, which is currently under way.
Grades from mining areas continued broadly in line with the previous period,
ranging from 0.11 to 0.78 carats/100 tonnes. Diamonds produced during the
period were an average size of 1.47 carats per stone, and diamonds larger than 2
carats accounted for more than 63% of production.
Demand for Oena production remained strong during the period, with the average
value of production sold dropping slightly from $855 to $822 per carat,
reflecting the lower average stone size. A number of special diamonds were
recovered during the period, including stones of 15.28, 18.01 and 8.3 carats
that sold for $4,169, $1,263 and $2,295 per carat, respectively.
With worldwide rough diamond prices averaging approximately $60 per carat, the
prices achieved for Oena production place it in the top echelon of diamond mines
worldwide in terms of diamond value. We remain confident that the value of run
of mine production will continue to rise as production volumes increase and as a
consequence of the continued shortage of large, high quality diamonds.
Avontuur Mine, Namaqualand, South Africa
The primary focus of operations at Avontuur during the period was on the
completion of work on the new dense media separation plant (DMS). The first
diamonds were recovered from the DMS in January.
High levels of clay were encountered in some of the gravels mined during the
period, primarily from the SP3 deposit, which caused problems at the processing
plant and led to disappointing recoveries. Following a review of the plant in
February by metallurgical consultants, it was decided to introduce a scrubbing
circuit to break up any clay or conglomerate in the gravels and ensure proper
liberation and recovery of diamonds. The scrubbing circuit will be added on to
the feed section of the DMS. This work started in March and is expected to be
completed by May. As the DMS cannot be operated while this work is being
carried out, the existing rotary pan treatment plants, which were scheduled for
shutdown at the end of January, have been kept in operation on a limited basis.
Once the scrubbing circuit has been installed the evaluation of the SP3 gravels
will be completed. The DMS will be operated on a double shift basis once this
evaluation has been completed and sufficient stockpiles of gravel are available.
Production at Avontuur during the period was 1,022 carats. Diamonds produced
continued to be approximately 85% gem quality, with an average size of 0.22
carats per stone. Average prices for gem quality production was slightly lower
at $104 per carat, compared to $108 last year. Grades from mining areas ranged
from 4 to 14 carats/100 tonnes.
Exploration activity continued during the period and was focused on drilling of
targets that had been identified by data from the high resolution airborne
electromagnetic survey that was acquired last year. Interpretation of this data
has identified 6 new exploration targets. A total of 1,037 metres of percussion
drilling was carried out over 88 holes on these targets during the period. This
drilling has identified a number of promising gravel deposits with thick, well
developed gravel horizons. Bulk sampling of these targets will commence in the
coming months. Exploration is also planned for the area adjoining Avontuur to
the east, for which a new prospecting permit was recently granted.
Exploration
Groen River Valley, Namaqualand, South Africa
Work on ground mapping and aerial photo and satellite analysis of the lower
Groen River Valley area continued during the period, and was primarily focused
on the new extensions to the Groen River palaeo channels that were identified
last year. It is expected that prospecting permits for these areas, for which
applications were lodged last year, will be granted in the next few months.
These new permits will, when granted, more than double the size of our land
position in the area
Targets for the next phase of drilling and sampling in the Groen River Valley
have now been identified, and this work is expected to begin in the next few
months. We remain confident that the Groen River Valley has the potential to
become an important new alluvial diamond-producing region. Based on the
substantial land position that Firestone holds in the area, this project has the
potential to make a significant contribution to the Company's future growth.
New Namaqualand Projects
Last year the Company lodged prospecting permit applications over a new palaeo
river system in Namaqualand. This system has been proven to be diamondiferous,
and satellite and aerial photo interpretation have identified palaeo channels
over a length of more than 10 kilometres. We are awaiting the issue of these
permits, following which drilling and bulk sampling will be carried out.
During the period the Company lodged prospecting permit applications for two new
areas on the Orange River that have been identified by aerial photo analysis and
ground geological mapping. We are also awaiting the issue of these permits.
Mopipi, Botswana
Exploration work at the Mopipi project during the period continued to be focused
on the Mopipi Dam area, where previous kimberlitic indicator mineral sampling
had indicated the presence of diamondiferous kimberlite in the area, and where
more than 100 potential kimberlite drilling targets were identified by a high
resolution helicopter-borne magnetic survey carried out last year.
During the period, additional field work and sampling were carried out to
prioritise and rank the drilling targets, following which eighteen targets were
drilled. All drill holes were terminated in Karoo sandstone, without
encountering kimberlite. While it was disappointing that kimberlite was not
intersected during this drilling, analysis of material recovered from the drill
holes resulted in the unexpected recovery of a significant number of kimberlitic
pyrope and other suspected kimberlitic indicator minerals from the Karoo. As
the Karoo sandstone predates the intrusion of the nearby Orapa kimberlites,
these kimberlitic indicator minerals cannot have been derived from Orapa,
proving that there is another kimberlite source in the region in addition to the
Orapa field. This kimberlite source is older and will lie at a greater depth
than has been previously thought likely.
Since the end of the period, more detailed examination and analysis of the
indicator minerals recovered from the Karoo has been carried out.
Reinterpretation of geophysical and other data on the basis of a revised model
of older and deeper kimberlites is currently under way to define new drilling
targets.
During the period a significant new chrome diopside anomaly was identified in
Mopipi South, and follow-up sampling in this area will be carried out in the
coming year.
Most of Firestone's work to date has focused on a relatively small area,
comprising less than 5% of the 3,000 square kilometers covered by Firestone's
prospecting licences. In the interests of accelerating the pace of exploration
across the entire prospecting license area, the Company has decided to consider
the introduction of a joint venture partner to the project. Expressions of
interest have been received from a number of major mining companies, with whom
discussions are at an advanced stage.
Black Economic Empowerment
Firestone's BEE strategy has developed substantially beyond meeting the minimum
requirements specified in the Mining Charter published last year by the South
African government. Firestone's objective is to identify, acquire and develop
new projects through a strategic partnership with a black South African company.
Negotiations with a prominent black South African group are at an advanced
stage and are expected to be concluded shortly. We believe that this will yield
significant new growth prospects for the Company.
The Diamond Market
Despite difficult global economic conditions, the rough diamond market had a
very good year in 2002, with De Beers' sales increasing 16% to $5.15 billion.
This trend continued through the end of the year, with retail diamond jewellery
sales in the US, which accounts for 50% of global sales, increasing by 8% in the
fourth quarter.
Rough diamond prices have continued to rise in the first quarter of 2003, driven
by continued shortages across all segments of the market. The longer term
outlook for diamond prices continues to be positive. Demand for rough diamonds
has exceeded mined supply by a total of $3.4 billion over the past four years,
with the shortfall being made up by reductions in De Beer's stocks, which are
now at minimum working levels. This supply deficit is expected to continue for
the next 3-5 years and to continue to drive rough diamond prices higher.
Outlook
In recent weeks the South African government published the first draft of the
Mineral and Petroleum Royalty Bill, which will accompany the Mineral and
Petroleum Development Bill that was enacted last year. The draft Royalty Bill
provides for royalties on diamonds to increase from 5% to 8%. This will not
affect Oena or Avontuur until the respective mining permits are renewed, which
will not be until 2008.
Looking forward, we expect that production for the year will continue
substantially ahead of last year. We plan to acquire one new mining project in
Namaqualand and expect that permits for our three new exploration projects will
be issued during the coming year and that the pace of activity in relation to
joint ventures and new projects will continue to increase.
James F. Kenny
Chairman
31 March 2003
FIRESTONE DIAMONDS PLC
UNAUDITED CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE SIX MONTHS TO 31 DECEMBER, 2002
Six months to 31 Six months to 31 Twelve months to
December 2002 December 2001
(Unaudited) (Unaudited) 30 June 2002
(Audited)
Production 546,826 445,694 885,964
Turnover 505,054 209,605 842,334
Change in stocks of finished goods and 41,772 236,089 43,630
in work in progress
Other operating income 13,613 4,760 -
Operating charges (290,330) (49,246) (558,924)
Raw materials and consumables (15,281) (54,462) (26,169)
Staff costs (70,506) (62,559) (90,542)
Depreciation and amortisation (34,845) (39,601) (62,882)
Operating profit 149,478 244,586 147,447
Interest receivable and similar income 18,107 3,799 46,630
Interest payable and similar charges (163) (1,265) (945)
Profit on ordinary activities before 167,422 247,120 193,132
taxation
Deferred tax on profit on ordinary (57,267) (87,701) (49,314)
activities
Profit on ordinary activities after 110,155 159,419 143,818
taxation
Minority interests (13,031) (19,373) (19,721)
Retained profit for the period 97,124 140,046 124,097
Earnings per share
Basic profit per share 0.3 p. 0.5 p. 0.4 p.
Diluted profit per share 0.3 p. 0.4 p. 0.4 p.
Turnover is wholly derived from continuing activities.
Notes:
1. The financial statements have been prepared in accordance with
applicable UK accounting standards and under the historical cost convention.
The principal accounting policies of the group are set out in the group's 2002
annual report and financial statements.
2. The financial information set out above does not constitute statutory
accounts as defined in section 240 of the Companies Act 1985. Statutory
accounts for the twelve months to 30 June, 2002, on which the report of the
auditors was unqualified and did not contain a statement under section 237 of
the Companies Act 1985, have been filed with Registrar of Companies.
3. Basic earnings per share is based on the weighted average number of
shares in issue for the period of 34,200,469. Diluted earnings per share is
based on the weighted average number of shares in issue for the period of plus
potential dilutive ordinary shares arising from share options for the period of
34,200,469.
4. The directors are not declaring a dividend for the period.
5. Copies of this report are being sent to all shareholders. Additional
copies will be available to the public from the offices of Bell Lawrie White, 48
St Vincent Street, Glasgow, G2 5TS and will be posted on the Company's website
at www.firestonediamonds.com.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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