TIDMFDI
RNS Number : 7802Q
Firestone Diamonds PLC
23 October 2019
23 October 2019
FIRESTONE DIAMONDS Plc
("Firestone", the "Group" or the "Company")
Quarterly Update on Operations
Firestone Diamonds plc (AIM: FDI), provides its quarterly update
on operations at its Liqhobong Diamond Mine ("Liqhobong") for the
quarter ended 30 September 2019 (Q1 of the Company's 2020 financial
year).
First quarter ended 30 September 2019
Highlights:
-- Lost time injury free quarter (Q4-FY19: one lost time injury);
-- Recovery of a 98 carat light yellow makeable stone which was sold in October;
-- Diamond recoveries of 201 091 carats (Q4-FY19: 208 572 carats);
-- Grade of 21 carats per hundred tonnes ("cpht") (Q4-FY19: 23 cpht);
-- Ore tonnes treated of 963 986 tonnes (Q4-FY19: 904 902 tonnes);
-- Waste tonnes moved for the quarter of 1 379 758 tonnes (Q4-FY19: 1 337 281 tonnes);
-- Operating cost of US$10.32 per tonne treated below guidance
(Q4-FY19: US$12.57 per tonne treated);
-- A single sale took place during the quarter when 168 612
carats were sold (Q4-FY19: 177 521 carats), realising revenue of
US$10.6 million (Q4-FY19: US$12.7 million) at an average value of
US$63 per carat (Q4-FY19: US$71 per carat); and
-- Cash balance at 30 September 2019 of US$21.8 million
(Q4-FY19: US$26.3 million) after interest and capital repayment to
ABSA of US$2.9 million for the quarter.
Post quarter power interruption
As announced previously, power supply to the mine was
interrupted on 1 October, since which time, the mine's treatment
plant has temporarily suspended operation until power is restored.
The Company anticipates that production at the mine will recommence
in early November, once the rented diesel generators are on site
and connected to the mine's electrical infrastructure.
Paul Bosma, Chief Executive Officer, commented:
"The first quarter performance was again solid from an
operational perspective. However, from a market perspective,
pricing remains subdued. The Company continues to engage with its
debtholders to ensure it can sustain operations through the current
downturn and further announcements in this regard can be expected
in due course.
The recent power interruption is an unexpected setback for the
company but we are doing our utmost to limit the negative impact on
production by renting generators to get operations up and running
again until the grid power is back online and stable. We will
advise on any adjustments to guidance in future quarterly
updates."
Operations
During the quarter ended 30 September 2019, Liqhobong treated
963 986 tonnes of ore which was the highest quantity of tonnes
treated during a quarter since a year ago in Q1-FY19, and 7% more
tonnes than the previous quarter's 904 902 tonnes. The higher
quantity of tonnes treated was due to better equipment availability
and higher plant throughput rate.
Mining continued in predominantly the higher-grade southern part
of the pit during the quarter with the additional objective of
excavating a large sump in that part of the pit which receives a
high quantity of catchment water from rainfall. The wet season
typically commences towards the end of the 2019 calendar year.
Although a higher quantity of tonnes was treated during the
quarter, total carats recovered was 4% less at 201 091 carats
(Q4-FY19: 208 572 carats), as a result of a lower recovered grade
of 20.9 cpht (Q4-FY19: 23.0 cpht). The recovered grade continued to
be lower than the expected reserve grade, which, as reported
previously, seems to result from treating harder, more competent
ore as the pit becomes deeper. Work which initially focussed on
post-blast fragmentation and further optimisation of the tertiary
crushing section to improve liberation and throughput, has been
extended to other areas which could possibly be impacting on
recovered grades.
The positive trend on waste tonnes moved continued into the
first quarter when 3% more waste,
1 379 758 tonnes was moved (Q4-FY19: 1 337 281 tonnes). However,
fewer tonnes were moved than was expected due to lower availability
of mining fleet. Plans are in place to recover the tonnage
shortfall over the next three quarters in order to meet guidance by
the year-end.
Safety, Health & Environment
The first quarter was worked safely with no Lost Time Injury's
recorded.
Financial
A combination of continued cost savings and local currency
weakness against the US dollar, resulted in operating costs for the
quarter of US$10.32 per tonne treated (Q4-FY19: US$12.57 per tonne
treated) including waste stripping, which was well below guidance
of between US$13.50 and US$14.50 per tonne treated. Operating costs
are expected to be US$0.6 million higher for each month that
generator power is used. The Muela Hydropower station is scheduled
to recommence operation from 1 December, on which basis, generator
power will only be used for approximately one month, with an
estimated total cost impact for the year of 19 US cents per tonne
treated. The cash balance at the end of the quarter was US$21.8
million (Q4-FY19: 26.3 million).
Diamond Sales and Market Outlook
A total of 168 612 carats was sold in the quarter (Q4-FY19: 177
521 carats), realising revenue of US$10.6 million (Q4-FY19: US$12.7
million) at an average value of US$63 per carat (Q4-FY19: US$71 per
carat). Average diamond values were lower than the previous quarter
despite the sale of several notable stones which included a 37
carat fancy pink stone and a 55 carat fancy yellow stone, due
mainly to the sale of fewer high value stones and a slightly higher
proportion of smaller goods.
The prices realised for the smaller goods that make up the bulk
of our production by volume, remain subdued, impacted by a build-up
of rough and polished inventory in the midstream. Prices are
expected to increase towards the end of 2020 as rough supply
decreases as a result of continued reduced sales volumes by De
Beers and Alrosa and the anticipated closure of the Argyle mine in
Australia.
Impact of Power interruption
The power interruption that affected operations since 1 October
is expected to result in the loss of just over one month's
production, as plans are currently underway to resume operations
during early November. In addition to the loss of revenue, the
Company has continued to incur fixed operating costs of
approximately US$1.8 million during October. The Company is working
with its insurance broker to assess the extent to which the
interruption is covered by its business interruption policy. The
December tender has been cancelled due to fewer carats being
recovered as a result of the power outage, and consequently the
Company's next tender will take place in January 2020. The loss of
revenue and higher operating costs will impact the Company's cash
balance, and together with the impact of a weaker diamond pricing
environment, has placed further focus on finding an interim
solution regarding its indebtedness with ABSA bank and the
bondholders, who both remain actively engaged.
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulations (EU) No. 596/2014 ("MAR").
For more information please visit www.firestonediamonds.com or
contact:
+ 44 (0)20 3319
Firestone Diamonds plc 1690
Paul Bosma
Grant Ferriman
Macquarie Capital (Europe) Limited (Nomad +44 (0)20 3037
and Broker) 2000
Nick Stamp
Alex Reynolds
+44 (0)20 7920
Tavistock (Public and Investor Relations) 3150
Jos Simson
Gareth Tredway
Annabel de Morgan
Background information on Firestone
Firestone is an international diamond mining company with
operations in Lesotho. Firestone commenced commercial production in
July 2017 at the Liqhobong Diamond Mine. Liqhobong is owned 75% by
Firestone and 25% by the Government of Lesotho. Lesotho is one of
Africa's significant new diamond producers, hosting Gem Diamonds'
Letšeng Mine, Firestone's Liqhobong Mine, Namakwa Diamonds' Kao
Mine and Lucapa's Mothae Mine.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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