Member Info for LordSnooty

You don't attribute your post but you are clearly repeating a news report. In my opinion it serves to highlight the distance that Firestone has to go after the profligacy of the Kenny years, and the enormous challenges that lie ahead. At this stage the future looks doubtful, given no progress in Botswana, a $150m CAPEX requirement still unfunded, a darkening macroeconomic picture and the effect that will have on diamond prices and continuing silence from the company on the longstanding question of grid power. They need to bring costs under control, and fast. Not one for the short-termer, IMO.lp

I sold out here after the RTO by KDD, in the mid-twenties and at a small profit after years in EPD and KDD. I stand by my reasoning below and do not expect the share price to move far from here in the short to medium term. I am not convinced by the specials/fancies story yet, in the sense that it remains unclear just how many they will find - particularly at K5, the highest grade facie, which is relatively small in area and which will be mined out quickly - and how frequently. I still find it is awfully convenient they could discover so many rare stones in such a short space of time, to propel the share price up by 60% in a few weeks. I suspect the usual spin. Time will tell.

I did not say the whole 40% will be through new equity - as I outlined three posts ago, even 10% of the required £100m+ would mean 150m new shares at current share price. Typically with such requirements though, capex funding is split 60-80%/40-20% debt/equity, so you can see the kind of dilution possible. I urge you to read again the quote from Firestone I posted two posts below: "~ 60% of capital requirement combined with diamond off-take agreements and other marketing arrangements. Balance funded through an increase in capital". This is ambiguous at best, and does not spell out any hard details such as exactly what percentage will be "an increase in capital". We've all heard the line about "minimum impact to existing shareholders" before. Unlike many other, new people here, I know the long history Firestone has of spinning news flow. so I am not convinced they have suddenly turned over a new leaf. In my view it's entirely possible funding is already confidentially agreed, hence the recent buying by Henderson and consequent price movement. Whether it will be to the advantage of small shareholders though, I couldn't say - but history is not kind in that respect. Finally, even if funding is available, installation of plant will mean several years of disruption at LQB, during which time throughput will be impaired a good deal, with necessary impact on the share price.

from Firestone should read, in full: "Debt funding through project finance expected to represent ~ 60% of capital requirement combined with diamond off-take agreements and other marketing arrangements. Balance funded through an increase in capital." (p17 DFS presentation). I repeat, this is worded deliberately, work out why yourself.

of course believe what you choose to believe, but on past performance I would not hold my breath that any assurances that dilution will be kept to a minimum will come true. As I said, the company has itself stated that 40% of capex will come from "diamond off take agreements and other marketing arrangements" (ie revenue). This is typical Firestone obfuscation which any long term watcher will be familiar with. Beware - even if the equity portion represents only 10% of capex needed (which it won't - it will be a greater proportion), that is £10m+, or 150m new shares at current sp.

perhaps you have not read that they will likely fund capex 60% debt and 40% revenue/equity.

Good for you. I remain less sanguine, for the reasons outlined and because I note Firestone's long-standing economy with the truth

actually Scolaro bought his interest in Kopane for 3.5p and sold it to Firestone for the equivalent of around 11p at the time of the deal. You may choose to look on the bright side but I remind you that no-one has ever managed to run Lighobong profitably yet, and grid power, which was supposed to have been up and running at least eight months ago, is crucial to this. There has been no explanation for the delay. In addition, while the recent finds of specials and fancies is encouraging, their long term occurrence, their value and the ability of the plant and operator not to crush them are all issues still open to question. Finally, it will be 2015 at least before new plant is installed and worked up. Given past experience that may be very optimistic, but in any case the period between now and then, at least three years, they will be running old plant, admitted by FDI themselves to shortly be at the end of its serviceable life. Inevitably there will be disruption and downtime during installation of new plant too. And all this is assuming that funding will be available - as yet by no means certain.

it was another era. Scolaro is a smooth operator.

if you think Firestone has changed its long term habit of providing shareholders with what they want to hear and being very economical with the facts. Last week's published DFS is a case in point: the aim is simple to set the scene for a capital increase., which will likely happen very soon in my view. $167m in capex needed, of which perhaps 20-30%, or c.£21-32m will be capital increase (p.17 DFS). This when the total mcap stands today at c.£32m. Prepare for some dilution. In addition, bank loan negotiations still not concluded after at least a year of trying. Nothing on when grid power might be available, even though it was supposed to be operational Q1 this year.

for me the question continues to hinge on whether Liqhobong is viable in the long term - and I mean viable enough to service the debt that you suggest then continue to generating blu sky profits. I have enough experience following the mine through - successively - Williams, Spencer, Read, Scolaro, the Kennys and now Wilkes, to seriously question whether it will ever become commercial, the latest DFS notwithstanding.

with apologies and thanks to BamBamRubble over on ADVFN; I am not an accountant so cannot vouch for the accuracy nor validity of the figures presented. i offer them purely for discussion: BAM BAM Rubble 26 Oct'12 - 12:48 - 1019 of 1026 The broker note from Fairfax suggested the 8% discount factor was unacceptable. The DFS posted yesterday for the Gahcho Kue diamond project for example applied a factor of 15%. The main problem is the project does not look commercially attractive for lenders. Using NPV12 (although NPV15 would be even better) the numbers can be adjusted accordingly for the following factors, as potential lenders will do in their own sensitivity analysis; NPV(8%) of $335m, adjusted to NPV(12%) = $140m reduction to $195m +$2.5/ton increase in opex ($16.65/ton) = $70m reduction to $125m Diamond value up 2%/year rather than 3% = $60m reduction to $65m at the average 10 year Rand/Dollar rate = $65m reduction to zero That's before looking at capex and grade. Any adjustment there and NPV becomes negative.

I held EPD through KDD to FDI for five years. I know about Liqhobong and I know about the management of Firestone. I know about this DFS and I know about an almost identical one several years ago. Hold if you will but for the reasons stated by Winnifrith - mainly the bank debt FDI will have to take on (if they can actually achieve it), coupled with the downtime and disruption caused by installation and working up of new plant - it is likely to be several years before you see worthwhile movement in the share price. As for the blue diamonds - how convenient that they were found in a rush just before the DFS and a capital raising becomes necessary.

http://tomwinnifrith.com/articles/1069/firestone-diamonds-sell