LONDON (Alliance News) - BlueRock Diamonds PLC Wednesday said its pretax loss narrowed in the first half but said it will have to extend its convertible loan note with its largest shareholder after operational difficulties depleted its cash balance.
BlueRock shares were down 6.7% to 21.0 pence per share on Wednesday afternoon.
The company reported a GBP294,830 pretax loss in the first six months of 2015, wider than the GBP321,850 loss reported a year earlier after its expenses rose.
BlueRock is a diamond mining company with activities in the Kimberley region of South Africa, namely the Kareevlei project. BlueRock launched a new processing plant at the project in May, which was then hampered by technical problems, pushing back its production schedule to July.
Once the plant was up and running, it began processing the ground stockpiled during the time that the old plant was closed and the new plant was being established and commissioned. Since the new plant began operating it has produced 607 carats at an average of 2 carats per hundred tonnes.
"Initially, the results from the new plant were at the expected grade, but since we have begun to process an older stock pile, which contains a mixture of ground excavated from various levels including top level calcrete up to 22 metres depth, recovery grades have been much lower," it said.
"Whilst results are within the expected variability of our deposit it is clear that our current stock pile is of lower than expected average grade and not economic to process at this stage on its own," it added.
As a result of those problems, the company hired its competent person to review its models for the mine, which resulted in the revenue forecast per carat being altered to USD232 per carat, up from its previous estimate of USD183 per carat but down from the estimate in 2014 of USD242 per carat.
However, because the stockpiled ore is uneconomic on its own, the company has decided to undertake a "more aggressive drilling, blasting and excavation programme" at the project so it can blend the stockpiled ore with mined ore to make the operation economical.
"We also anticipate that in the near future that we and our subcontractor will move to a double shift hence quadrupling throughput from its current levels, which will require us to further expedite our drilling and blasting programme," it said.
The drilling and blasting is expected to begin on October 5, and the plant will begin processing lower level kimberlite by the end of October, it said.
In order to fund the company and its plans, it said it intends to increase the convertible loan note entered into last year with its biggest shareholder Mark Poole by a further GBP400,000 because the low levels of recovery have depleted its cash resources. The total note will be worth GBP850,000 following that extension.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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