RNS Number:9036S
Firestone Diamonds PLC
05 December 2003
Firestone Diamonds plc
Preliminary statement of results
for the year ended 30 June, 2003
LONDON: 5 December, 2003 - The Board of Firestone Diamonds plc, ("the Company"),
the UK-based diamond mining and exploration company, announces preliminary
results for the year ended 30 June, 2003.
HIGHLIGHTS
General
* Group production increased 31% to #1.2 million
* Share placement in August 2003 raised approximately #1.88 million after
expenses
* Formed strategic black empowerment joint venture through African Star
Minerals
* Rough diamond prices increased 15% in 2004 and further price rises
expected
Bonte Koe Mine, South Africa
* Entered into an agreement to acquire the Bonte Koe Mine
* Mining operations to be re-established through African Star Minerals in
first half of 2004
Avontuur Mine, South Africa
* Production of 2,038 carats
* Average value of production increased from $108 to $110 per carat
* New dense media separation plant operational
Oena Mine, South Africa
* 116% increase in production to 1,989 carats
* Average value of production $852 per carat
Groen River Valley, South Africa
* Drilling programme completed and results awaited
* Bulk sampling to take place next year
Mopipi, Botswana
* Drilling programme produced evidence of a new kimberlite source in the
Mopipi region
* Joint venture discussions at an advanced stage
Dear Shareholder,
The past year saw continued progress in the development of Firestone's mining
operations and exploration projects. The primary focus at our mining operations
was on the construction and commissioning of the new dense medium separation
(DMS) plant at the Avontuur Mine, which was completed by the end of the year.
Group production for the year increased 31% to #1.2 million, primarily as a
result of increased capacity and production at the Oena Mine. Exploration
activity during the year was mainly concentrated on the Groen River Valley and
Mopipi projects.
The most significant strategic development during the year was the formation of
a black economic empowerment joint venture, African Star Minerals, in
partnership with a prominent South African black empowerment group. After the
year-end we announced our intention to acquire and re-establish mining
operations at the Bonte Koe Mine through African Star Minerals. Bonte Koe is
expected to make a substantial impact on the Company's revenues and
profitability once it reaches full production.
Growth in shareholder value for smaller mining companies such as Firestone is
primarily driven by exploration success. As Firestone has a significant
competitive advantage through its access to data on more than forty years of
diamond exploration in Namaqualand and elsewhere, we intend to exploit this data
more aggressively to identify new, large scale exploration projects that have
the potential to yield significant reserves of gem quality diamonds. We intend
to increase the allocation of the Company's resources and expertise to our
exploration activities and, as a result, will rely more on joint venture
partners and contractors at our mining operations. We have been very active in
pursuing new projects for both Firestone and African Star Minerals and expect to
be able to announce developments in this regard later in 2004.
Black Economic Empowerment
One of the South African government's key policy objectives is to increase the
level of participation by previously disadvantaged South Africans in the South
African economy. The government has introduced legislation to support black
economic empowerment (BEE) in a number of industries. During the year it
published the Mining Charter, which sets out specific BEE objectives for the
South African mining industry.
The publication of the Mining Charter has initiated a process of significant
change in the South African mining industry, with many established South African
mining companies undertaking major corporate restructurings, and many assets
that would otherwise have remained undeveloped becoming available. This process
has created many opportunities for smaller companies such as Firestone.
Firestone's BEE strategy is to fully engage in the black empowerment process,
beyond the minimum requirements specified in the Mining Charter, in order to
pursue these opportunities.
During the year the Company formed a new joint venture company, African Star
Minerals, in partnership with African Star Investments, a prominent South
African black empowerment group. Firestone holds a 75% interest in African Star
Minerals, with African Star Investments holding a 25% interest and an option to
purchase an additional 24% at market value. African Star Minerals will focus
primarily on alluvial diamond projects in the Namaqualand region of South
Africa, where Firestone's current mining operations are located, and will seek
to secure new projects that can take advantage of the Company's existing
infrastructure in Namaqualand.
After the year-end, the Company announced that it had agreed to acquire the
Bonte Koe Mine in Namaqualand, and that it intends to re-establish mining
operations at Bonte Koe through African Star Minerals. We are at an advanced
stage in evaluating a number of other mining and exploration projects for
African Star Minerals, and expects to announce specific details in this regard
later in the year.
Mining
Bonte Koe Mine, Namaqualand, South Africa
The Company spent a significant amount of time during the year evaluating a new
mining opportunity at the Bonte Koe Mine on the Buffels River in Namaqualand.
The Buffels River has been a significant diamond producing area for the past 40
years, with mining operations by De Beers, Trans Hex and others producing an
estimated total of over 3 million carats, with a current value of over $750
million. Following a comprehensive review of the property, the Company entered
into an agreement to acquire the Bonte Koe Mine. The Company intends to
re-establish mining operations at Bonte Koe through African Star Minerals.
Previous operations at Bonte Koe have recovered approximately 180,000 carats
from diamondiferous proto Buffels River gravels. It is estimated that
approximately 1.5 million tonnes of proto gravels remain at Bonte Koe with an
average grade of approximately 10 carats per hundred tonnes, giving a resource
of approximately 158,000 carats. Diamonds from Bonte Koe average approximately
0.4 carats per stone and have an estimated value of approximately $200 per
carat, giving a gross value to the resource of $31 million.
Activity at Bonte Koe since the end of the year has been focused primarily on
the completion of the development and operating plans for the mine. Ddraig
Mineral Developments, a UK-based independent geological and mining consultancy,
was retained to carry out a review of Firestone's plans, including treatment
plant design, metallurgical specifications, mining methods, and mining,
exploration and environmental management plans. Following the recent completion
of this review, these plans have been finalised, and a supplier has been chosen
for the construction of a 100 tonnes per hour DMS gravel treatment plant at
Bonte Koe.
A detailed environmental management programme report covering rehabilitation of
both historical and planned mining operations has been completed and submitted
to the Department of Minerals & Energy for approval. Planning for the
refurbishment of accommodation, workshop and office facilities and the
re-establishment of power and water supply is also at an advanced stage, and it
is expected that mining operations will commence at Bonte Koe in the first half
of 2004.
The Company plans to mine the proto gravels at Bonte Koe over a four year
period, during which time drilling and sampling of the substantial resource of
meso gravels on the property will be carried out to identify additional possible
mineable reserves.
Avontuur Mine, Namaqualand, South Africa
The primary focus of operations at Avontuur during the first half of the year
was on the completion of work on the new DMS plant. The first diamonds were
recovered from the DMS in January. However, due to unexpectedly high levels of
clay that were encountered in some of the gravels mined during the year, it was
decided to introduce a scrubbing circuit to the feed section of the DMS to break
up any clay or conglomerate in the gravels and ensure proper liberation and
recovery of diamonds. This work was completed by June, resulting in significant
improvements in processing of clay material. The DMS is now fully operational,
and production levels have increased substantially as a result.
Production at Avontuur during the year was limited, as expected, by the work
being carried out on the DMS plant. Production for the second half of the year
was unchanged from the first half, with total production for the year of 2,038
carats. Diamonds produced continued to be approximately 85% gem quality, with
an average size of 0.23 carats per stone. Average prices for gem quality
production increased to $110 per carat by the end of the year, compared to $108
last year, and have since risen to $126 per carat as the rough diamond market
has continued to strengthen. Grades from mining areas ranged from 4 to 23
carats/100 tonnes.
Exploration activity continued during the year and was focused on drilling of
targets that had been identified by data from a high resolution airborne
electromagnetic survey that was acquired last year. Interpretation of this data
identified 6 new exploration targets. A total of 3,747 metres of percussion
drilling was carried out over 281 holes on these targets. This drilling has
identified a number of promising gravel deposits with thick, well developed
gravel horizons. Bulk sampling of the first of these targets will be carried
out in the coming year. Exploration is also planned for the area adjoining
Avontuur to the east, for which a new prospecting permit was recently granted.
Oena Mine, Namaqualand, South Africa
Continued progress was made at the Oena Mine during the year. Earthmoving and
gravel processing capacity were significantly increased last year, primarily
through the introduction of a mining contractor, Ruslyn Mining & Plant Hire, on
a revenue-sharing basis, and also from an expansion of Firestone's own capacity.
The impact of this capacity increase was seen during the year, with production
rising to 1,989 carats, a 116% increase compared to last year. Demand for Oena
production remained strong during the year, with the average value of production
sold dropping slightly from $855 to $852 per carat, reflecting the lower average
stone size produced. A number of special diamonds were recovered during the
year, including stones of 63.23, 47.02 and 15.28 carats that sold for $2,000,
$2,300 and $4,169 per carat, respectively.
Meso gravel mining operations were carried out at the Oena terrace by Ruslyn
Mining and Firestone. As initial mining operations at the Sandberg terrace last
year had encountered problems with water-saturated and high clay content gravel,
it was decided to relocate the mobile gravel treatment plant and field screening
unit from Sandberg to the Blokwerf terrace. This work was completed and the
treatment plant and screening unit were commissioned at Blokwerf at the
beginning of 2003. Overall grades from mining areas continued in line with
last year, and ranged from 0.08 to 1.40 carats/100 tonnes. Diamonds produced
averaged 1.44 carats per stone.
Towards the end of the year Ruslyn Mining's operations at Oena were suspended
following a dispute over their failure to meet a number of commitments under the
terms of their contract at Oena. Although a number of settlement discussions
have been held, the dispute has not yet been resolved, and the Company is in the
process of identifying another contractor to replace Ruslyn should the dispute
not be resolved to the Company's satisfaction.
Exploration
Groen River Valley, Namaqualand, South Africa
The Groen River Valley project is the Company's most promising exploration
project in South Africa, primarily due to the high quality and large size of
diamonds that have been mined in the area, which are similar in quality to those
from the Orange River.
The Company's recent exploration activities have been primarily focused on the
Groen River Valley. A significant amount of work was undertaken on ground
mapping and on aerial photo and satellite analysis. This work was primarily
focused on the new extensions to the Groen River palaeo channels that were
identified last year.
A major percussion drilling programme was planned for a number of significant
targets that were identified during the year by ground mapping and aerial photo
and satellite analysis. This drilling programme commenced after the year-end,
and has recently been completed, with 98 holes drilled over a total of 2,203
metres. Interpretation of drilling logs and examination of samples is currently
under way, and results will be announced early next year. The most promising
targets identified by this drilling programme will be selected for bulk sampling
in 2004.
Applications were lodged last year for prospecting permits for new areas in the
Groen River Valley. It has taken longer than originally anticipated for these
permits to be granted, but it is now expected that they will be granted early
next year, following which drilling and sampling will be carried out on targets
that have already been identified by aerial photo and satellite analysis.
We remain confident that the Groen River Valley has the potential to become an
important new alluvial diamond-producing region, particularly given the fact
that the supply shortfall in the rough diamond market is at its greatest at the
large, high quality end of the market, where prices have risen strongly this
year. Based on the substantial land position that Firestone holds in the area,
this project has the potential to make a significant contribution to the
Company's future growth.
Mopipi, Botswana
Exploration work at the Mopipi project during the first half of the year was
focused on the Mopipi Dam area, where previous kimberlitic indicator mineral
sampling had indicated the presence of diamondiferous kimberlite. More than 100
geophysical targets were selected for sampling and follow up work, following
which percussion drilling was carried out on eighteen of these targets. All of
the holes were terminated in Karoo sandstone.
Although no kimberlite was encountered in these drill holes, analysis of
material recovered resulted in the unexpected recovery of a significant number
of kimberlitic pyrope and other kimberlitic indicator minerals from the Karoo.
This significant discovery proved that the kimberlitic indicator minerals at
Mopipi cannot have been derived from the nearby Orapa kimberlite field, as the
Karoo sandstone predates the intrusion of the Orapa field, and also proves that
there is another kimberlite source in the region in addition to Orapa. However,
this kimberlite source is older and will lie at a greater depth than was
previously thought likely. Subsequent to this discovery, work during the rest
of the year was focused on the reinterpretation of geophysical, satellite and
sampling data to identify new drilling targets deeper in the Karoo sandstone.
During the year a significant new chrome diopside anomaly was identified in a
gravel-filled palaeo-channel in Mopipi South. A number of interesting
geophysical and satellite features are located upstream along this drainage and
a follow-up sampling on these anomalies will be carried out next year.
Most of Firestone's work to date has been focused around the Mopipi Dam area,
which comprises less than 5% of the 3,000 square kilometers covered by the
Company's prospecting licences. Given this fact, the increasing opportunities
available to Firestone in South Africa, and in the interests of accelerating the
pace of exploration across the entire Mopipi prospecting license area, the
Company decided during the year to consider the introduction of a joint venture
partner to the project. Discussions have been held with a number of potential
joint venture partners, and although a number of offers have been received, the
terms of these offers are not considered satisfactory, and discussions are still
ongoing. We remain confident that a joint venture agreement will be concluded
during the coming year. In the meantime we will continue limited field work in
Mopipi on a targeted basis.
New Exploration 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 initial satellite and aerial photo interpretation has identified palaeo
channels over a length of more than 10 kilometres. Additional satellite and
aerial photo interpretation carried out during the year has identified a
significant new target more than 8 kilometres in length. We are still awaiting
the issue of these permits, which is now expected to take place early next year,
following which drilling and bulk sampling will be carried out on the targets
that have been identified.
Financial
Group production for the year increased 31% to #1.2 million, primarily as a
result of increased capacity and production at the Oena Mine. Operating profit
for the year decreased slightly, primarily due to the strengthening of the Rand
against the US dollar and costs associated with the construction of the DMS
plant at Avontuur.
In August 2003 the Company completed a share placing with institutional and
other investors to raise approximately #1.88 million net of expenses. The
primary purpose of the fund raising was to finance the acquisition of, and the
redevelopment of mining operations at, the Bonte Koe Mine. The Company
currently has cash reserves and diamond stocks of approximately #1.2 million.
During the year 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%. Significant
negative feedback on the draft bill was received from both South African and
international mining companies, following which the government announced that it
would carry out extensive consultations with industry before publishing a
revised draft. These consultations may result in the proposed royalty on
diamonds being reduced. Even if the Bill is not changed, the impact on the
Company will not be significant, as the new royalties would not impact Oena or
Avontuur until their respective mining permits are next due for renewal, which
will not be until 2008.
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. The
strength in the market continued into 2003, with De Beers' sales for the first
half of the year increasing 2.75% to $2.29 billion.
Rough diamond prices rose by about 15% in 2003, with De Beers increasing prices
three times since the beginning of the year. These increases have been driven
by the growing shortfall in rough diamond supply across all segments of the
market, which is expected to continue for the next three to five years. With
De Beers' stocks now at minimum working levels, and the US economy, which
accounts for 50% of global retail diamond sales, growing strongly, the outlook
for diamond prices continues to be positive.
Outlook
The main priority for the Company in the current financial year is to bring the
Bonte Koe mine into production. Bonte Koe is expected to make a significant
contribution to overall group turnover when it comes into production, and is
expected to become the Company's most profitable operation. Production at the
Avontuur Mine is expected to continue at a substantially higher level than last
year, although the dispute with Ruslyn Mining will have an impact on production
at the Oena Mine for the current year.
The pace of exploration activity in Namaqualand will continue to increase this
year, with the primary focus being on the Groen River Valley project. The
Company is awaiting permits for a number of new exploration projects, and
expects to start drilling once the permits are issued, which is expected to be
later in the year. The Company has also been very active in pursuing new
projects for both Firestone and African Star Minerals and expects to be able to
announce developments in this regard later in the year.
With the many opportunities that are available to Firestone, and with the
strength in the rough diamond market expected to continue for the next few
years, we remain confident about the Company's long term prospects. Our main
concern, as it has been for all mining companies and exporters in South Africa,
is the continued strength of the Rand, which has been one of the top performing
currencies in the world over the past two years, having appreciated by 38%
against the US dollar in 2002, and by 36% so far this year.
Finally, I would like to record the Board's appreciation of the continued
dedication and commitment of our senior management and staff over the past year,
all of whom have contributed to the Company's continued growth and development.
James F. Kenny
Chairman
4 December 2003
For further information:
Philip Kenny, Firestone Diamonds +44 20 7370 6452 / +44 7831 324 645
Leesa Peters, Conduit PR +44 20 7936 9095/ +44 7812 159 885
Jamie Cumming, Bell Lawrie White +44 141 314 8103 / +44 776 8044 620
Website: www.firestonediamonds.com
FIRESTONE DIAMONDS PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 30 JUNE 2003
2003 2002
# #
Production 1,157,980 885,964
-------- ------
Turnover 1,157,289 842,334
Change in stocks of finished goods
and in work in progress 691 43,630
------- ------
Raw materials and consumables (133,019) (26,169)
Staff costs (104,069) (90,542)
Depreciation and amortisation (58,652) (62,882)
Other operating charges (727,183) (558,924)
Operating profit 135,057 147,447
Interest receivable and similar income 30,071 46,630
Interest payable and similar charges (2,261) (945)
Profit on ordinary activities
before taxation 162,867 193,132
Tax on profit on ordinary activities (71,520) (49,314)
Profit on ordinary activities
after taxation 91,347 143,818
Minority interests (26,140) (19,271)
Retained profit for the year 65,207 124,547
Earnings per share
Basic earnings per share 0.2p 0.4p
Diluted earnings per share 0.2p 0.4p
Turnover is wholly derived from continuing activities.
CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
FOR THE YEAR ENDED 30 JUNE 2003
# #
Profit for the financial year 65,207 124,547
Currency translation differences 168,171 (161,151)
Total recognised gains and
losses for the year 233,378 (36,604)
FIRESTONE DIAMONDS PLC
CONSOLIDATED BALANCE SHEET
30 JUNE 2003
2003 2002
(as restated)
# # # #
FIXED ASSETS
Intangible assets 9,028,912 7,531,142
Tangible assets 1,844,402 1,180,034
Investments 378,275 285,934
11,251,589 8,997,110
CURRENT ASSETS
Stocks 128,754 90,637
Debtors 250,736 275,376
Cash at bank and in hand 273,636 1,472,463
653,126 1,838,476
CREDITORS
Amounts falling due within
one year (618,283) (335,139)
NET CURRENT ASSETS 34,843 1,503,337
TOTAL ASSETS LESS
CURRENT LIABILITIES 11,286,432 10,500,447
CREDITORS
Amounts falling due after one year (193,638) (4,110)
PROVISIONS FOR LIABILITIES
AND CHARGES
Other (564,852) (364,037)
Deferred taxation (403,574) (267,450)
(968,426) (631,487)
NET ASSETS 10,124,368 9,864,850
CAPITAL AND RESERVES
Called up share capital 6,840,094 6,840,094
Share premium accoun 3,648,123 3,648,123
Other reserves (1,076,399) (1,076,399)
Profit and loss account 708,885 475,507
SHAREHOLDERS' FUNDS 10,120,703 9,887,325
Minority interests 3,665 (22,475)
10,124,368 9,864,850
Approved by the Board on 4 December 2003
P Kenny
Director
FIRESTONE DIAMONDS PLC
CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 30 JUNE 2003
2003 2002
# # # #
Net cash inflow from
operating activities 576,399 186,569
Returns on investments and
servicing of finance
Interest received 30,071 46,630
Interest element of finance
lease payments (2,261) (945)
Net cash inflow from returns on
investments and servicing
of finance 27,810 45,685
Capital expenditure and financial investment
Payments to acquire
intangible fixed assets (1,624,597) (1,074,706)
Payments to acquire
tangible fixed assets (62,653) (162,663)
Receipts from sales of
tangible fixed assets - 2,234
Payments to acquire
investments (93,013) (109,548)
Net cash outflow from capital expenditure
and financial investment (1,780,263) (1,344,683)
Net cash outflow before use of
liquid resources and financing (1,176,054) (1,112,429)
Financing
Issue of ordinary share capital - 2,202,009
Finance lease payments (40,378) (2,925)
(40,378) 2,199,084
(Decrease)/increase in cash (1,216,432) 1,086,655
Notes to the preliminary statement of results for the year ended 30 June 2003
1. Basis of preparation
The financial statements have been prepared in accordance with applicable UK
accounting standards and under the historical cost convention. The principal
accounting policies of the group are set out in the group's 2003 annual report
and financial statements.
2. Earnings per share
Basic earnings per share is based on a profit of #65,207 (2002: #124,547) and a
weighted average number of shares in issue of 34,200,469 (2002: 32,832,201).
Diluted earnings per share is based on a profit of #65,207 (2002: #124,547).
The weighted average number of shares used to calculate diluted earnings per
share incorporates the weighted average number of shares in issue of 34,200,469
(2002: 32,832,201) plus dilutive potential ordinary shares arising from share
options of 4,884,679 (2002: 1,453,836) totalling 39,085,148 (2002: 34,286,037).
3. Publication of non-statutory accounts
The financial information set out above does not constitute statutory accounts
as defined in section 240 of the Companies Act 1985. The consolidated profit
and loss account, balance sheet and cash flow statement and associated notes
have been extracted from the Company's 2003 statutory financial statements,
which were approved by the Board on 4 December 2003. The auditors have
reported on these accounts; their report is unqualified and does not contain
statements under section 237(2) or (3) of the Companies Act 1985. The financial
statements will be filed with the Registrar of Companies in due course. The
report and accounts will be posted to shareholders in the near future.
4. Annual General Meeting
The Company's Annual General Meeting will be held at MWB Business Exchange,
107-111 Fleet St, London EC4A 2AB on 13 January, 2004 at 12.30 p.m.
5. Dividends
The directors do not recommend the payment of a dividend for the period.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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