Botswana Diam Regulatory News (BOD)

20 December 2023

Botswana Diamonds PLC

("Botswana Diamonds" or the "Company")

Annual Results for the Year Ended 30 June 2023

Notice of Annual General Meeting

Botswana Diamonds plc (AIM: BOD) today announces its audited annual results for the year ended 30 June 2023.

Chairman's Statement

Botswana Diamonds has been active in the period under review. This, at a time when the market for exploration shares is virtually non-existent and during a period of great political and economic turmoil.

In South Africa we produced diamonds. We intend to bring our Thorny River diamond ground into operation in 2024. We used our adjacent Marsfontein licence as a proof-of-concept project. We joint ventured with a competent contractor on a 15% / 20% royalty basis depending on size. We are satisfied with the operation though only producing 1,741 carats of diamonds. We intended to produce at Marsfontein until all permits were issued for Thorny River. However, a 40% fall in diamond prices combined with a 30% increase in energy prices, eliminated positive cash flows for most diamond producers, so the Marsfontein operation is temporarily on care and maintenance. The current expectation is that production will start again in January 2024.

While mining Marsfontein, we discovered a higher-grade area which we were preparing to mine when closedown occurred. This will be our target area when mining resumes. The intention is then to move on to Thorny River where operations will be significantly larger. Final approvals are, we are told, imminent.

I should remind you that Thorny River is estimated to contain anywhere from 1.2m - 2.1m tons of ore at an expected grade between 46 and 76 carats per hundred tons. Diamond value per carat is expected to be between US $120 and $220 per carat. The mining plan has already been prepared. Transferring from Marsfontein to Thorny River will take only a matter of weeks as it will use the same mining equipment.

Botswana

Botswana is still our principal focus. We remain convinced that more diamond deposits are still to be discovered.

In mining, improved milling, interparticle crushing and XRT sorting will enhance recoveries. Solar power will significantly reduce energy costs in remote locations.

In exploration, we are excited by advances in data analytics. Botswana Diamonds owns the largest diamond data set in the country including 375,000km of airborne geophysical data, 228,000km of soil sample results, 606 ground geophysical surveys and 32,000km of drill logs. This is where Artificial Intelligence ('AI'), and Machine Learning offers huge scope. In the coming year we will structure a way forward to mine this data.

You may recall we had a joint venture with Alrosa, they did good work on 16 licences held in Sunland, the joint venture company, but for corporate reasons they withdrew from Botswana in 2018. The 16 Sunland licences expired, and the ground returned to the State. We analysed the data and identified four licences that we believe to have significant potential. A 100% owned Botswana Diamonds subsidiary has applied for the four licences. We are hopeful that they will be awarded in the near future.

You will notice in the accounts a write-off of exploration expenditure of £3.2m. This is a non-cash item, relating to the closedown of the Sunland joint venture. The money was spent several years ago. While the exploration did not find commercial deposits, it provided us with valuable data which we used to select the four licences currently under application with the Botswana Department of Mines.

We own 100% of the KX36 discovery in the Kalahari. This is a 3.5 hectare kimberlite pipe with an indicated resource of 17.9 million tonnes at 35 carats per 100 tons ('cpht'), and a further inferred resource of 6.7 million tonnes at 36 cpht. Overall value per carat is US $65. There is a bulk sampling plant onsite, including crushing, screening, scrubbing Dense Media Separation and X-Ray recovery.

No other kimberlite has yet been found in the surrounding ground. Kimberlites occur in clusters, so the KX36 discovery is anomalous. We therefore acquired licences surrounding KX36. Following detailed work on the data we already held, we identified 4 high interest anomalies, all within a 6-kilometre radius of KX36. We ran ground magnetic surveys over these anomalies. They further confirmed our findings. We have conducted a detailed ground geophysical survey over the four areas which, if successful, will lead to drilling.

KX36 is only 60km away from the Ghaghoo diamond mine, which is currently closed. Over the past two years we have studied the economics of reopening the mine. We are seeking a partner to joint venture the Ghaghoo mine. We would then add KX36 to the Ghaghoo resource - enhancing the value of both. Together, they represent a significant diamond resource. Recent turmoil in world financial markets complicated the task, management is developing options.

Our other significant interest in Botswana is the Maibwe project. Maibwe was a joint venture between a Botswana copper company, BCL, a local Botswana entrepreneur and a South African company, Siseko, where Botswana holds a 51% interest. BCL went into liquidation due to its non-diamond activities - but not before exploration found four kimberlite pipes containing diamonds. One of the pipes contained significant quantities of microdiamonds.

The BCL holding has been sold to Future Minerals and Siseko. Botswana Diamonds has therefore increased its overall stake in the JV to 26%. Further drilling is required on the licences, especially focusing on the kimberlite containing microdiamonds.

The Diamond Market

No review can ignore upheavals in the diamond market. Economic uncertainty impacts consumers purchases, particularly of luxury goods. Interest rate increases impact diamond wholesalers who traditionally hold large debt-financed inventories. They cut back their purchases of rough uncut stones, crashing prices in the process.

Another concern is the impact of lab grown diamonds. They have been around for many years, but improvements in technology and low barriers to entry attract new entrants. One consequence has been a dramatic fall in the prices of lab grown diamonds particularly at the smaller end. They are becoming a commodity.

Natural diamonds on the other hand are very rare. An analogy can be made with automobiles. A Ferrari and a Ford Mondeo are both good cars but that's the only commonality they share.

Owning a natural diamond is an experience. They really are forever. Owning one represents a range of human emotions and tells a lot about the owner.

A case can be made whereby buying a lab grown diamond will introduce a wider audience to diamonds. Remember 3 billion people are going to enter the middle class in the coming two decades. They represent a massive potential market for diamonds. China is already second only to the US as a market for diamonds. The hope is that consumers will trade up to a natural diamond.

Meanwhile, the supply of natural stones is not expected to grow. Certainly, the life of some mines will be shortened by the drop in prices. Botswana is the largest diamond producer in the world - by value, producing high quality large stones. This market is least likely to be impacted by the price falls and lab grown diamonds.

The Future of Botswana Diamonds

We live in hope that stock market interest in diamond companies will revive. Exploration costs money and even if successful, does not produce revenue for many years. The collapse of interest by investors in the AIM market in London has hurt all explorers. In recent years the pool of new investors has shrunk dramatically meaning little exploration. Mines have finite, often short lives, so it is highly likely that a future scarcity of many minerals, including diamonds, will occur. The surviving producers should benefit.

Botswana Diamonds has a loyal but dwindling cohort of investors. We have sought to generate revenue thereby avoiding fundraising and developing late-stage projects such as Thorny River.

Bringing the Ghaghoo mine back into operation if it can be achieved and this will cost a fraction of a new mine cost and take a small fraction of the time it takes for a discovery to become a mine.

We believe strongly that more deposits will be discovered in Botswana. But we are not blind to other opportunities. We continue to spend time and money in Zimbabwe, which is long known to have diamond potential. We have made some progress.

We continue to look at older discoveries and former mines in South Africa where, by the application of new thinking and technology commercially viable projects can be found. We have been granted a prospecting licence on the Reivilo cluster of kimberlites in South Africa.

We have acquired a library of data on these kimberlites in return for a 3% royalty. The data is now under review.

Current ongoing operations are funded by private investors, most of whom are close to the board of directors.

Diamond prices have risen in recent weeks while operating costs have either stabilised or dropped. There is cautious optimism for 2024. Any upswing will transform sentiment.

John Teeling

Chairman

19 December 2023

Annual Report and Notice of Annual General Meeting

The Company's Annual Report and Accounts for the year ended 30 June 2023 (the "Annual Report") will be mailed shortly only to those shareholders who have elected to receive it. Otherwise, shareholders will be notified that the Annual Report and Accounts will be available on the website at www.botswanadiamonds.co.uk. Copies of The Annual Report will also be available for collection from the company's registered office at Suite 1, 7th Floor, 50 Broadway, London SW1H 0BL.

The Annual General Meeting ("AGM") is due to be held Wednesday 24th January 2024 at The Hilton London Paddington, 146 Praed St, London W2 1EE, United Kingdom at 11.00am.  A Notice of the AGM will be included in the Annual Report.

The information communicated within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No 596/2014 which is part of UK law by virtue of the European Union (Withdrawal) Act 2018. The person who arranged for the release of this announcement on behalf of the Company was John Teeling, Director.

A copy of this announcement is available on the Company's website, at www.botswanadiamonds.co.uk

Enquiries:

www.botswanadiamonds.co.uk

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2023

CONSOLIDATED BALANCE SHEET AS AT 30 JUNE 2023

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2023

CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 30 JUNE 2023

1. ACCOUNTING POLICIES

The accounting policies and methods of computation followed in these financial statements are consistent with those published in the Group's Annual Report for the year ended 30 June 2022. The financial statements have also been prepared in accordance with International Financial Reporting Standards (IFRSs) as issued by the International Accounting Standards Board (IASB).

The financial information set out below does not constitute the Group's financial statements for the year ended 30 June 2023 or 30 June 2022, but is derived from those accounts. The financial statements for the year ended 30 June 2022 have been delivered to Companies House and those for the year ended 30 June 2023 will be delivered to Companies House shortly

?The auditors have reported on the 2022 statements; their report was unqualified and did not contain a statement under section 498(2) or 498(3) of the Companies Act 2006. 

2. GOING CONCERN

The Group incurred a loss for the year of £3,381,999 (2022: loss of £716,430) after exchange differences on retranslation of foreign operations of £299,492 (2022: £22,562) at the balance sheet date. The Group had net current liabilities of £320,437 (2022: £526,724) at the balance sheet date. These conditions represent material uncertainties that may cast doubt on the Group's ability to continue as a going concern.

The directors have prepared cashflow projections and forecasts for a period of not less than 12 months from the date of this report which indicate that the group will require additional funding for working capital requirements and develop existing projects. As the Group is not revenue or cash generating it relies on raising capital from the public market. Subsequent to year end the Company has raised a total of £380,000 from a placing. Further details are outlined in Note 11.

As in previous years the Directors have given careful consideration to the appropriateness of the going concern basis in the preparation of the financial statements and believe the going concern basis is appropriate for these financial statements. The financial statements do not include any adjustments that would result if the Group was unable to continue as a going concern.

3. LOSS PER SHARE

Basic loss per share is computed by dividing the loss after taxation for the year available to ordinary shareholders by the weighted average number of ordinary shares in issue and ranking for dividend during the year. Diluted earnings per share is computed by dividing the profit or loss after taxation for the year by the weighted average number of ordinary shares in issue, adjusted for the effect of all dilutive potential ordinary shares that were outstanding during the year.

The following table sets forth the computation for basic and diluted earnings per share (EPS):

The following potential ordinary shares are anti-dilutive and are therefore excluded from the weighted average number of shares for the purposes of the diluted earnings per share:

4. INTANGIBLE ASSETS

Exploration and evaluation assets relate to expenditure incurred in exploration for diamonds in Botswana and South Africa. The directors are aware that by its nature there is an inherent uncertainty in exploration and evaluation assets and therefore inherent uncertainty in relation to the carrying value of capitalized exploration and evaluation assets.

The Group incurred expenditure to date of £3,124,284 on certain licences held in Botswana. During the current year these licences lapsed and were not renewed. The directors decided to fully impair the expenditure and accordingly, an impairment charge of £3,124,284 was recorded in the current year.

On 11 November 2014 the Brightstone block was farmed out to BCL Investments (Proprietary) Limited, a Botswana Company, who assumed responsibility for the work programme. Botswana Diamonds had retained a 15% equity interest in the project. On 20 July 2022 the Group increased its' stake to 26% equity interest in the project.

On 6 February 2017 the Group entered into an Option and Earn-In Agreement with Vutomi Mining Pty Ltd and Razorbill Properties 12 Pty Ltd (collectively known as 'Vutomi'), a private diamond exploration and development firm in South Africa. Pursuant to the terms of the Agreement, Botswana Diamonds earned a 40% equity interest in the project. A separate agreement for funding of exploration resulted in the Company's interest in Vutomi increasing from 40% to 45.94%.

On 28 September 2022 the Board announced that it had exercised its pre-emptive right to acquire the outstanding third-party interests in Vutomi and had increased its' interest from 45.94% to 74%.

The consideration for Vutomi comprised 56,989,330 new ordinary shares of £0.0025 each in the Company ("Consideration Shares"). There are no lock-in arrangements and the Consideration Shares were issued in two tranches. 28,464,665 Consideration Shares (First Tranche) were issued to the vendors on 28 September 2022 and the balance of 28,524,665 (Second Tranche) were issued on 27 January 2023.

The Company also agreed that immediately on completion of the Acquisition, the Company would sell 26% of Vutomi for a deferred consideration of US$316,333 to the Company's local South African Empowerment partner, Baroville Trade and Investments 02 Proprietary Limited ("Baroville"), in order to comply with South African requirements on empowerment ownership, which will be funded by a loan from Botswana Diamonds. On completion, the Company therefore owns 74% of Vutomi.

The realisation of these intangible assets is dependent on the successful discovery and development of economic diamond resources and the ability of the Group to raise sufficient finance to develop the projects. It is subject to a number of significant potential risks, as set out below.

The Group's exploration activities are subject to a number of significant and potential risks including:

- licence obligations;

- exchange rate risks;

- uncertainties over development and operational costs;

- political and legal risks, including arrangements with governments for licenses, profit sharing and taxation;

- foreign investment risks including increases in taxes, royalties and renegotiation of contracts;

- title to assets;

- financial risk management ;

- going concern; and

- operational and environmental risks.

Included in additions for the year are £71,521 (2022: £71,768) of directors' remuneration which has been capitalized. This is for time spent directly on the operations rather than on corporate activities.

5. PLANT AND EQUIPMENT

On 18 July 2020 the Group entered into an agreement to acquire the KX36 Diamond discovery in Botswana, along with two adjacent Prospecting Licences and a diamond processing plant. These interests are part of a package held by Sekaka Diamond Exploration (Pty) Ltd. The acquisition was completed on 20 November 2020. The diamond processing plant is a recently constructed, fit-for-purpose bulk sampling plant on site. The sampling plant includes crushing, scrubbing, dense media separation circuits and x-ray recovery modules within a secured area. 

6. INVESTMENT IN SUBSIDIARES

Botswana Diamonds entered into a Sale of Shares Agreement with Petra Diamonds Limited ("Petra") and Kalahari Diamonds Limited ("Kalahari Diamonds") on 18 July 2020 to acquire the entire issued share capital of Sekaka Diamond Exploration (Pty) Ltd ("Sekaka") currently held by Kalahari Diamonds, a wholly-owned subsidiary of Petra. The acquisition was completed on 20 November 2020.

On 28 September 2022 the Board announced that it had exercised its pre-emptive right to acquire the outstanding third-party interests in Vutomi and had increased its' interest from 45.94% to 74%. The value of the investment of £988,079 relates to the 74% interest in the Vutomi project. Further information is detailed in Note 4 above.

In the opinion of the directors, at 30 June 2023, the fair value of the investments in subsidiaries is not less than their carrying amounts.

7. CALLED-UP SHARE CAPITAL

Movements in share capital

On 4 July 2022, a total of 1,666,667 warrants were exercised at a price of 0.60p per warrant for £10,000.

On 8 September 2022, a total of 47,000,000 warrants were exercised at a price of 0.60p per warrant for £282,000.

On 28 September 2022, the Company issued 28,464,665 new ordinary shares of 0.25p each as the First Tranche of consideration shares to be issued to the vendors of Vutomi. Further information is detailed in Note 4.

On 27 January 2023, a total of 58,737,455 warrants were exercised at a price of 0.60p per warrant for £352,425.

On 27 January 2023, the Company issued 28,524,665 new ordinary shares of 0.25p each as the Second Tranche of consideration shares to be issued to the vendors of Vutomi. Further information is detailed in Note 4.

8. SHARE-BASED PAYMENTS

SHARE OPTIONS

The Group issues equity-settled share-based payments to certain directors and individuals who have performed services for the Group. Equity-settled share-based payments are measured at fair value at the date of grant. Fair value is measured by use of a Black-Scholes valuation model.

The Group plan provides for a grant price equal to the average quoted market price of the ordinary shares on the date of grant.

WARRANTS

Refer to note 7 Called up Share Capital for the details of the share options and warrants.

9. OTHER RESERVES

Share Based Payment Reserve

The share based payment reserve arises on the grant of share options under the share option plan as detailed in Note 8.

Translation Reserve

The translation reserve arises from the translation of foreign operations.

Other Reserves

During 2010 the Company acquired certain assets and liabilities from African Diamonds plc, a Company under common control. The assets and liabilities acquired were recognised at their book value and no goodwill was recognised on acquisition. The difference between the book value of the assets acquired and the purchase consideration was recognised directly in reserves.

10. RETAINED DEFICIT

Retained Deficit

Retained deficit comprises of losses incurred in the current and prior years.

11. POST BALANCE SHEET EVENTS

On 27 November 2023, the Company raised £380,000 through a placing of 76,000,000 new ordinary shares at a placing price of 0.5p per share. Each placing share has one warrant attached with the right to subscribe for one new ordinary share at a price of 0.5p for a period of two years from 27 November 2023.

There were no other significant post balance sheet events since year end.

12. GENERAL INFORMATION

The Annual Report and Accounts will be mailed shortly only to those shareholders who have elected to receive it. Otherwise, shareholders will be notified that the Annual Report and Accounts will be available on the website at www.botswanadiamonds.co.uk. Copies of The Annual Report will also be available for collection from the company's registered office at Suite 1, 7th Floor, 50 Broadway, London SW1H 0BL

13. ANNUAL GENERAL MEETING

The Annual General Meeting is due to be held on Wednesday 24th January 2024 at The Hilton London, Paddington, 146 Praed St, London W2 1EE, United Kingdom at 11.00am. A Notice of the Annual General Meeting is included in the Company's Annual Report.

ENDS