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From: Dale
ArtDate: 31 March 2004
Section: (FILLYABOOTS NEWS RELEASES)
Remote Name: 195.92.168.169
Date: 02/04/04
Time: 19:09
31st March 2004
Firestone Diamonds Unaudited Interim Results for the Six Months to 31 December, 2003
News Item - Conduit PR
LONDON: 31 March, 2004 - 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, 2003.
HIGHLIGHTS
Financial · After tax profits increased 22% to £134,404 · Rough diamond prices increased 15% in 2003 and 8% to date in 2004 · Share placement in August 2003 raised approximately £1.88 million after expenses
Bonte Koe Mine, South Africa · Entered into an agreement to acquire the Bonte Koe Mine · Mine re-development work at an advanced stage · Mining operations expected to commence in first half of 2004
Avontuur Mine, South Africa · New dense media separation plant fully operational during the period · Production increased 184% to 2,900 carats · Average value of gem quality diamonds sold increased 15% to $126 per carat
Oena Mine, South Africa · Overall production declined 63% due to dispute with mining contractor; production from Firestone's operations increased 30% to 363 carats · Average value of diamonds sold increased 42% to $1,207 per carat
Groen River Valley, South Africa · Drilling programme completed and major new gravel deposit identified · Full interpretation of drilling results to be completed and results announced shortly · Bulk sampling of new deposit and further drilling to take place later in the year · Awaiting issue of prospecting permit for new area
Mopipi, Botswana · New field exploration programme to commence in the next quarter · Joint venture discussions at an advanced stage and expected to be concluded shortly
Exploration · New exploration permits expected to be issued in Namaqualand · Significant new exploration project to be announced shortly
Chairman's Statement
The period saw continued progress in the development of Firestone's mining operations and exploration projects. The primary focus at our mining operations was on planning for the commencement of mining operations at the Bonte Koe Mine through African Star Minerals, the Company's black empowerment joint venture. Bonte Koe is expected to make a substantial impact on the Company's revenues and profitability once it reaches full production.
Exploration activity during the period was mainly concentrated on the Groen River Valley, where drilling has indicated the presence of at least one significant gravel deposit that is likely to be diamondiferous and will be sampled later in the year. We have continued discussions with potential joint venture partners in respect of our Mopipi project, and expect to conclude a joint venture on the project in the near future, following which a new field exploration programme will commence.
Mining
Bonte Koe Mine, Namaqualand, South Africa In July 2003, the Company announced that it had agreed to acquire the Bonte Koe Mine in Namaqualand, and that it intended to re-establish mining operations at Bonte Koe through its black-empowerment joint venture, African Star Minerals.
The primary focus of the Company's mining operations during the rest of the period was on finalising plans for the development of new mining operations at Bonte Koe. An independent review of the development plans for Bonte Koe was carried out during the period, and covered treatment plant design, metallurgical specifications, and mining and exploration plans. Following this review, a supplier for the construction of a dense media separation ("DMS") gravel treatment plant was selected. An evaluation of exploration potential at Bonte Koe and other opportunities on the Buffels River was carried out recently, as a result of which it was decided to increase the capacity of the DMS plant from 100 to 150 tonnes per hour. This will allow the Company to increase the mining rate at Bonte Koe, and will also give the mine the capacity to process gravel from other locations on the Buffels River.
As the Company intends to expand its resource base and the scale of its operations in the Buffels River area, we have decided to upgrade the power and water infrastructure planned for Bonte Koe. Initial plans were to generate power on site and to truck process water for the DMS plant, but the Company has instead decided to construct a 10 km power line from the nearest Eskom substation, and to lay a 35km pipeline from the source of the process water supply that has been secured for the mine. While construction costs will be higher as a result of this decision, operating costs savings will be substantial, and are expected to pay for the capital costs during the first two years of operation.
Development work at Bonte Koe is now at an advanced stage. A project team of more than 50 people is currently working on the project, both on site and at the DMS plant supplier's facilities. Refurbishment of accommodation, workshop and office facilities is at an advanced stage, and site works for the DMS plant are under way. It is expected that mining operations will commence on schedule in the first half of 2004.
Avontuur Mine, Namaqualand, South Africa With the new DMS at Avontuur fully operational during the period, production levels increased substantially. Production during the period was 2,900 carats, an increase of 184% compared to the same period last year. Diamonds produced continued to be approximately 85% gem quality, with an average size of 0.23 carats per stone. Average prices for gem quality diamonds sold increased 15% to $126 per carat , in line with price increases in the rough diamond market in general. Grades from mining areas ranged from 3 to 30 carats/100 tonnes.
Exploration activity continued on targets that had been identified by data from a high resolution airborne electromagnetic survey conducted over the mine. Drilling on these targets last year had identified a number of promising gravel deposits with thick, well developed gravel horizons. An additional 1,819 metres of drilling was carried out over 102 holes on these targets, following which locations for bulk sampling have now been selected. Bulk sampling of the first of these targets will be carried out in the next six months.
Oena Mine, Namaqualand, South Africa Meso gravel mining operations were carried out by the Company at the Oena and Blokwerf terraces during the period. Production at the Oena terrace was significantly reduced due to the fact that no mining was carried out by the Company's contractor, Ruslyn Mining, following a dispute over their failure to meet a number of commitments under the terms of their contract. The dispute has not been resolved to the Company's satisfaction and, as a result, legal proceedings have been initiated against Ruslyn Mining. The Company is in the process of identifying another contractor to replace Ruslyn Mining, and is currently in negotiations with a number of parties. As a result, overall production at Oena declined 63% during the period, although production from the Company's own mining operations at Oena increased 30% to 363 carats. Grades from mining areas continued in line with last year, and ranged from 0.06 to 0.78 carats/100 tonnes, with diamonds produced averaging 1.36 carats per stone. Among the large stones produced were diamonds of 13.69, 13.1 and 7.81 carats.
With continued shortages of supply at the high end of the diamond market, demand for Oena production remained strong. The average value of diamonds sold increased 42% to $1,207 per carat, primarily due to the sale of a small number of large, high value stones.
Exploration
Groen River Valley, Namaqualand, South Africa The Groen River Valley project continued to be the primary focus of the Company's exploration activities 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.
A major percussion drilling programme was carried out on targets that had been identified by ground mapping and aerial photo and satellite analysis. Targets were drilled on five farms in the Groen River Valley, with 98 holes drilled over a total of 2,203 metres. Preliminary interpretation of the drilling logs and samples has been carried out for the first of the targets that was drilled, and indicates the presence of a very significant gravel deposit. As diamonds have already been recovered from the farm on which this target is located, this deposit is likely to be diamondiferous, and will be bulk sampled later in the year. Final interpretation of the drilling logs and samples for all the targets that were drilled will be completed in the next month. These results will be announced as soon as they are available.
An application for a prospecting permit for a new area in the Groen River Valley is still awaiting approval. This new permit will, when granted, double the size of our land position in the area. It is expected that this permit will be granted soon, following which drilling and sampling will be carried out on targets that have already been identified by aerial photo and satellite analysis of the new area.
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 over the past 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 activity at the Company's Mopipi joint venture project was focused on preparing for a new field exploration programme, which will commence in the next quarter. The primary focus of the exploration programme will be to follow up on a significant new chrome diopside anomaly located last year on a palaeo-channel in the Mopipi South prospecting license area. A number of interesting geophysical and satellite features that are located upstream along this drainage will be targeted during the new field exploration programme.
As work to date on the Mopipi project has covered less than 5% of the 3,000 square kilometers covered by the Company's prospecting licenses, and with the increasing opportunities available in South Africa, we decided last year to consider the introduction of a joint venture partner to the project. Discussions continued with a number of potential joint venture partners during the period, and an agreement with the Company's preferred joint venture partner is expected to be concluded shortly.
New Exploration Projects The Company has 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 last year has identified a significant new target more than 8 kilometres long. We are still awaiting the issue of these permits, following which drilling and bulk sampling will be carried out on the targets that have been identified. The Company has also been active on exploration outside of Namaqualand, and expects to be able to announce details of a significant new exploration project shortly.
The Diamond Market The strength in the diamond market continued during the period. De Beers has reported a 7% rise in rough diamond sales in 2003 to $5.5 billion and a further major reduction in its stockpile, and have indicated that it expects 2004 to be another good year for the diamond industry. Global retail sales of diamond jewellery increased 7% in 2003, with the US market, which accounts for 50% of global retail diamond sales, growing 10% in the second half of the year.
Rough diamond prices rose by about 15% in 2003, with De Beers increasing prices on three occasions during the year. This trend has continued into 2004, with De Beers increasing prices by 3% in January and 5% in March. These increases have been driven by the growing shortfall in rough diamond supply across all segments of the market. With De Beers' stocks now at minimum working levels, and the rough diamond supply deficit expected to continue for the next 3-5 years, the outlook for diamond prices continues to be very positive.
Financial Although production from Firestone's own mining operations increased during the period, the dispute with the mining contractor at Oena resulted in overall group turnover declining 6% to £475,134, although after tax profits rose 22% to £134,404. 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.
Profits during the period continued to be affected by the strength of the Rand, which has had an impact on all mining companies and exporters in South Africa. The Rand 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, by 36% in 2003, and by 4% so far in 2004.
Outlook The main priority for the Company for the rest of the 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 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.
Significant developments are also expected on the exploration front. The pace of exploration activity on our existing exploration projects will continue to increase this year, with the primary focus being on drilling and bulk sampling at the Groen River Valley, and a new field exploration programme at Mopipi. We have also increased the allocation of the Company's resources to the identification of new exploration projects. We intend to exploit the data that we have on more than forty years of diamond exploration in Namaqualand and elsewhere, to identify new, large scale exploration projects that have the potential to yield significant reserves of gem quality diamonds. We expect to be able to announce several new projects as a result of this work in the coming 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.
James F. Kenny Chairman
31 March 2004
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 Franklin Sonn African Star Investments +27 21 914 3510
Website: www.firestonediamonds.com
Leesa Peters Director Conduit PR Tel: +44 (0)20 7936 9095 Fax: + 44 (0) 20 7936 9100 Mob: +44 (0) 781 215 9885
www.conduitpr.com
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