FDI.L Regulatory News (FDI)

18 Dec 2006 07:01

Firestone Diamonds PLC18 December 2006 Firestone Diamonds plc Preliminary statement of results for the year ended 30 June, 2006 LONDON: 18 December, 2006 - The Board of Firestone Diamonds plc, ("Firestone" or"the Company"), the AIM-quoted diamond mining and exploration company (ticker:AIM:FDI), announces preliminary results for the year ended 30 June, 2006. SUMMARY Tsabong • Prospecting licences granted over the Tsabong kimberlite field in Botswana, one of the largest diamondiferous kimberlite fields in the world, with 70 known kimberlites, of which 17 are diamondiferous• Potential for significant economic kimberlite discovery. 10,000 metres of exploration drilling and 6,000 metres of core drilling planned for 2007. Three large kimberlites discovered in November 2006 - 22, 18 and 15 hectares Jwaneng and Orapa . Firestone is the largest holder of diamond exploration rights around the Orapa and Jwaneng mines; holdings doubled to 17,000 square kilometres during the year. De Beers conducting Zeppelin surveys over Firestone ground in Jwaneng; initial targets to be drilled in H1 2007. Extensive exploration work carried out by De Beers and Firestone in Orapa area; geophysics and drilling to continue in 2007 Groen River Valley . Thirteen deposits identified in the project area. High quality gem diamonds recovered from bulk sampling on HL deposit. Mobile sampling plant to be erected. Bulk sampling planned on GR2 deposit in H1 2007 Bonte Koe Mine . Joint mine development with De Beers. Operation expected to produce over 600,000 carats over 6 years. Production commenced in August 2006. Expected to produce average £3.5 million revenue and £2 million operating profit per annum at full capacity Financial . Turnover for H2 2006 in line with H1 06; turnover for FY 2006 down 36% due to limited production at Avontuur. Operating loss of £0.5 million due to development costs relating to Buffels River project. Turnover expected to increase 50% in H1 2007; substantial increase expected for FY 2007. Liquid assets of £10 million - £4 million in cash and £6 million shareholding in African Diamonds plc Outlook . Fundamentals in rough diamond market remain very strong; diamond prices expected to increase in 2007. Mining operations focused on new opportunities with De Beers close to existing operations. Applications pending for new exploration areas in Botswana and South Africa Dear Shareholder, The past year has seen good progress in the growth and development ofFirestone's exploration and mining project portfolio. Exploration HighlightsTsabong, BotswanaThe most notable development in respect of Firestone's exploration activitieshas been the significant expansion of our activities in Botswana. During theyear we doubled the size of our licence holdings in the Orapa and Jwaneng areasto 17,000 square kilometres, extending our position as the largest holder ofdiamond exploration rights around the major Orapa and Jwaneng mines. Thegranting of licences in October 2006 over 5,000 square kilometres covering theentire Tsabong kimberlite field was an important strategic development for theCompany, as Tsabong is one of the largest diamondiferous kimberlite fields inthe world. Tsabong contains 70 known kimberlites, of which 17 have been provento be diamondiferous, including the 180 hectare M1 kimberlite, which is one ofthe largest known diamondiferous kimberlites. We believe that the potential for an economic discovery at Tsabong is good.None of the previously known kimberlites have been evaluated on an adequatescale or with modern techniques. A detailed evaluation programme will becarried out on these kimberlites, with approximately 6,000 metres of coredrilling planned in 2007 to recover material for microdiamond, mineral chemistryand petrographic analysis. The Company plans to carry out approximately 10,000metres of exploration drilling on selected kimberlite targets by the end of2007, and we believe that there is good potential for the discovery of new,large-tonnage diamondiferous kimberlites. Rapid progress has been made at Tsabong since exploration commenced in November2006, with the discovery of three large kimberlites, with estimated sizes of 22,18 and 15 hectares, respectively. This is a significant achievement by ourexploration team, and with many more targets to drill we expect to continue tomake new discoveries when drilling resumes in January 2007. With rough diamond prices estimated to have tripled since the Tsabong field wasdiscovered in the early 1980's, the threshold for economic viability in the areahas been reduced substantially. A kimberlite in Tsabong with a moderate gradeof 20 cpht and average quality diamonds of $100 per carat would support alarge-scale, profitable mining operation, and we believe that such an objectiveis achievable. Jwaneng & Orapa, BotswanaGood progress was also made at the Company's exploration projects in the Jwanengand Orapa areas, the major development being the introduction of De Beers' newZeppelin Airborne Gravity Gradiometer system. The Zeppelin system produces afive to ten-fold improvement in data quality compared to other airborne gravitysystems. De Beers started conducting Zeppelin surveys over Firestone's Jwanengjoint venture areas in mid 2006, and drilling of targets identified by thesesurveys is expected to commence in the first half of 2007. In the Orapa area,drilling continued on targets identified by geophysical surveys conducted by DeBeers, and 1 new kimberlite was discovered during the year. Results have beenreceived from analysis of material from kimberlites BK18, BK53 and BK56. Nofurther work is planned on these kimberlites at this time. Further explorationdrilling is planned in the Orapa area in 2007. Groen River Valley, South AfricaExploration continued during the year at the Groen River Valley joint ventureproject with De Beers in South Africa, where previous exploration has proven thepresence of large, high quality diamonds. The HL deposit was the first ofthirteen deposits in the project area selected for sampling. Although nodiamonds were recovered from large diameter auger sampling carried out on thecentral part of the HL deposit, bulk sampling on the southern part of thedeposit since the end of the year has produced five high quality diamondsweighing 1.11 carats. Evaluation of the other 12 deposits in the project areais continuing, and drilling and sampling will be carried out on the seconddeposit, GR2, in the first half of 2007. A mobile sampling plant is beingerected in the Groen River Valley and is expected to be in operation in Q1 2007.The Company expects that the next phase of sampling in the Groen River Valleywill allow the Company to make substantial progress towards establishing theeconomic potential of the area. Other projectsThe Company is continuing to pursue several other exploration projects. TheCompany has pending applications for prospecting rights for a number of areas inSouth Africa and Botswana that are believed to have good exploration potential.It is expected that these applications will lead to new permits being granted in2007. Progress at our kimberlite exploration project in the US has been slowerthan expected, but an update on exploration will be provided in Q1 2007. Mining Operations HighlightsBonte Koe, South AfricaThe primary focus of the Company's mining operations was at Bonte Koe, which isoperated by the Company's black-empowerment subsidiary, African Star Minerals.The most important development during the year was the signing of an agreementwith De Beers in May 2006 to develop a new mining operation on the Buffels Riverin South Africa. The new mining operation will be based around the Bonte KoeMine, and will exploit deposits on the Buffels River over which De Beers holdsmining rights. Under the terms of the agreement Firestone is expanding the capacity of thetreatment plant at Bonte Koe in order to process gravel mined by De Beers fromthe Buffels River. This agreement marks a major milestone for FirestoneDiamonds as it provides the Company with assured revenue and cash flow for theduration of the Buffels River project. The new mining operation is expected toproduce approximately 600,000 carats over 6 years, and to provide Firestone withaverage annual revenue of approximately £3.5 million and annual operatingprofits of £2 million. Firestone's revenue and profits from the project couldincrease further through a potential increase in mineable resources in theBuffels River area and profit sharing arrangements with De Beers. Processing of De Beers' gravel commenced on a limited basis in August 2006 andhas continued while work on the plant expansion was being undertaken. This workis ahead of schedule, and commissioning is expected to take place in January2007. Oena and Avontuur, South AfricaNegotiations with mining contractors to take over operations at the Oena Mine ona revenue-sharing basis continued during the year. There has been considerableinterest from potential contractors due to the large gravel resource at Oena andthe exceptionally high value of diamonds produced, which was an average of over$1,500 per carat during the year. However, the Company has not yet been able tosecure satisfactory terms, and therefore has continued to maintain its ownmining operations at Oena. The planned expansion of mining operations atAvontuur was placed on hold pending approval from the Department of Minerals &Energy of the acquisition of the adjoining Hondeklip Bay Mine from Trans Hex,which is now expected in the first half of 2007. FinancialTurnover for the second half of the year continued in line with the first half,as expected. Although production at Bonte Koe increased during the year,limited mining operations at Avontuur resulted in turnover for the full yearbeing 36% lower compared to the previous year. Operations showed a loss for theyear, primarily as a result of increased costs at Bonte Koe relating to the DeBeers Buffels River joint venture. The Company has seen a substantial improvement in turnover since the end of theyear, principally as a result of the commencement of production at Bonte Koefrom the Buffels River project, and turnover for the first half of the currentfinancial year is expected to increase more than 50% compared to last year.Turnover for the full year is also expected to be substantially higher than lastyear as the expanded Bonte Koe plant ramps up to full capacity. During the year Firestone acquired a 6.5% interest in African Diamonds plc inexchange for issuing £2.8 million in new shares. African Diamonds has a jointventure with De Beers over ground which adjoins Firestone's Orapa and Mopipiprojects. African Diamonds' share price has increased significantly followingpositive results from evaluation of the AK6 kimberlite, which is now likely tobe developed into a new mine. The Company currently has liquid assets of over£10 million, with £4 million in cash and a shareholding in African Diamonds plcworth approximately £6 million. Diamond marketAfter several years of strongly rising prices across all segments of the roughdiamond market, prices softened somewhat in 2006, primarily as a result of DeBeers selling down their remaining stockpiles at the end of 2005. Thisprimarily affected the lower end of the market, while continued shortages oflarge, high quality goods, such as those produced at Oena, resulted in furtherprice increases during the year for these goods. The fundamentals of the diamonds business are very positive, with substantial,sustained shortfalls in supply projected for at least the next five to sevenyears. With De Beers' stockpiles now eliminated, we expect to see rough diamondprices begin another period of sustained increases in 2007. OutlookIn terms of Firestone's exploration projects, our primary focus for the nextyear will be on Tsabong. With 70 kimberlites already proven in our licence areaand the prospects of more discoveries being made when exploration resumes in2007, we believe that Tsabong has the potential to produce a major economicdiscovery. The Company intends to progress exploration and evaluationactivities at Tsabong as rapidly as possible and expects to make significantprogress towards establishing the economic potential of the area by the end of2007. The Company will also continue to focus on its other large scaleexploration projects around the Orapa and Jwaneng mines and at the Groen RiverValley. The recent commencement of production at the Buffels River project with De Beerswas a major milestone for the Company. With full production expected to bereached in 2007, the Company will start to generate significant revenue and cashflow. The attractions of relatively low risk, predictable revenues from jointventure mining projects such as this Buffels River are evident. Having proventhat we have the capability to design, build and operate mining operations tothe standard required by De Beers, we have shifted the focus for our miningresources to other similar opportunities with De Beers close to our existingoperations in Namaqualand. We have made good progress in this regard and hopeto be in a position to update shareholders on further developments soon. The Company's financial position is secure, with a current cash position of over£4 million, approximately £6 million in shares in African Diamonds andincreasing cash flow from our mining operations. Firestone has made considerable progress over the past year. With a highlyprospective exploration project portfolio, the financial resources to developthe portfolio and a very experienced technical and management team in place, weconsider the Company to be one of the best positioned junior companies in thediamond sector. Firestone is well placed to take advantage of what we believe will be severalyears of rising prices in the rough diamond market. We remain confident aboutthe Company's long term prospects and believe that we can achieve our objectiveof becoming a leading mid-tier diamond mining and exploration company. Finally, I would like to record the Board's appreciation of the continueddedication and commitment of our senior management and staff, who havecontributed to the Company's continued growth and development over the pastyear. James F. KennyChairman 15 December 2006 For further information:Philip Kenny, Firestone Diamonds +44 20 8834 1028 / +44 7831 324 645Laurence Read/Joss Simson, Conduit PR +44 20 7429 6600 / +44 7979 955 923Jamie Cumming, Bell Lawrie +44 141 314 8103 / +44 7768 044 620 www.firestonediamonds.com FIRESTONE DIAMONDS PLC CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 30 JUNE 2006 2006 2005 £ £ Turnover 598,290 940,706 Change in stocks of finished goodsand in work in progress (41,007) (11,728) Production 557,283 928,978 Raw materials and consumables (189,813) (148,795)Staff costs (141,198) (388,975)Depreciation and amortisation (184,557) (236,359)Other operating charges (588,250) (371,186) Operating loss (546,535) (216,337) Interest receivable and similar income 209,983 43,177Interest payable and similar charges (136,963) (149,409) Loss on ordinary activities before taxation (473,515) (322,569) Deferred tax on loss on ordinary activities 158,497 96,899 Loss on ordinary activities after taxation (315,018) (225,670) Minority interests 144,859 21,349 Loss for the year (170,159) (204,321) Loss per shareBasic loss per share (0.3)p (0.5)pDiluted loss per share (0.3)p (0.5)p Turnover is wholly derived from continuing activities. CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES FOR THE YEAR ENDED 30 JUNE 2006 £ £ Loss for the financial year (170,159) (204,321)Currency translation differences (1,521,627) (824,826)Deferred tax on exchange differences 279,173 125,705 Total recognised gains and losses for the year (1,412,613) (903,442) FIRESTONE DIAMONDS PLC CONSOLIDATED BALANCE SHEET 30 JUNE 2006 2006 2005 £ £ £ £ FIXED ASSETSIntangible assets 8,929,348 5,950,744Tangible assets 11,255,607 11,625,753Investments 3,078,550 230,439 23,263,505 17,806,936 CURRENT ASSETSStocks 64,570 105,793Debtors 1,886,790 598,898Cash at bank and in hand 4,750,506 2,112,261 6,701,866 2,816,952 CREDITORSAmounts falling due withinone year (940,193) (1,940,437) NET CURRENT ASSETS 5,761,673 876,515 TOTAL ASSETS LESS CURRENT LIABILITIES 29,025,178 18,683,451 CREDITORSAmounts falling due after one year (450,130) (718,815) PROVISIONS FOR LIABILITIESAND CHARGESOther provisions (580,909) (1,056,289)Deferred tax (323,328) (375,309) (904,237) (1,431,598) NET ASSETS 27,670,811 16,533,038 CAPITAL AND RESERVESCalled up share capital 11,151,581 9,167,594Share premium account 19,132,921 8,383,823Merger reserve (1,076,399) (1,076,399)Profit and loss account (1,331,890) 80,723 EQUITY SHAREHOLDERS' FUNDS 27,876,213 16,555,741Minority equity interests (205,402) (22,703) 27,670,811 16,533,038 FIRESTONE DIAMONDS PLC CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 30 JUNE 2006 2006 2005 £ £ £ £ Net cash (outflow)/inflow from operating (2,401,275) 1,382,286activities Returns on investments andservicing of financeInterest received 209,983 43,177Interest element of finance lease payments (34,049) (46,790)Interest paid on loans (102,914) (87,378) Net cash inflow/(outflow) from returns on 73,020 (90,991)investments and servicing of finance Capital expenditure and financial investmentPayments to acquire intangible fixed assets (3,569,192) (2,411,052)Payments to acquire tangible fixed assets (1,112,274) (1,804,860)Receipts from sales of tangible fixed assets 118,169 - Net cash outflow from capital expenditure (4,563,297) (4,215,912)and financial investment Net cash outflow before use of (6,891,552) (2,924,617)liquid resources and financing Liquid resourcesAmounts paid into short term deposits (2,066,694) - Net cash outflow from use of liquid resources (2,066,694) - FinancingRepayment of long term loans (210,854) (121,008)Issue of ordinary share capital 9,884,975 4,943,319Finance lease payments (104,991) (52,483) 9,569,130 4,769,828 Increase in cash 610,884 1,845,211 Notes to the preliminary statement of results for the year ended 30 June 2006 1. Basis of preparation The financial statements have been prepared in accordance with applicable UKaccounting standards and under the historical cost convention. 2. Loss per share Basic loss per share is based on a loss of £170,159 (2005: loss of £204,321) anda weighted average number of shares in issue of 52,383,903 (2005: 43,837,579).The diluted loss per share has been calculated on the same basis as basic lossper share because the effect of the potential ordinary shares (share options)reduces the net loss per share and is therefore anti-dilutive. 3. Publication of non-statutory accounts The financial information set out above does not constitute statutory accountsas defined in section 240 of the Companies Act 1985. The consolidated profit and loss account, balance sheet and cash flow statementand associated notes have been extracted from the Company's 2006 statutoryfinancial statements, which were approved by the Board on 15 December 2006. Theauditors have reported on these accounts; their report is unqualified and doesnot contain statements under section 237(2) or (3) of the Companies Act 1985.The financial statements will be filed with the Registrar of Companies in duecourse. The report and accounts will be posted to shareholders in the nearfuture. 4. Annual General Meeting The company's Annual General Meeting will be held at MWB Business Exchange, 78Cannon Street, Fourth Floor, London EC4N 6NQ on 29 January, 2007 at 12.00 p.m. 5. Dividends The directors do not recommend the payment of a dividend for the period. 6. Qualified person review The information in this statement has been reviewed by Mr. Tim Wilkes, B Sc, PrSci Nat, who is a qualified person for the purposes of the AIM Guidance Note forMining, Oil and Gas Companies. Mr. Wilkes is Chief Operating Officer ofFirestone Diamonds plc and has over 25 years experience in diamond exploration,mineral resource management and mining. Mr. Wilkes is a member of thesub-committee for diamonds of the South African Mineral Resource Committee(SAMREC). This information is provided by RNS The company news service from the London Stock Exchange