FDI.L Regulatory News (FDI)

31 Mar 2005 13:47

Firestone Diamonds PLC31 March 2005 31 March 2005 Firestone Diamonds plc Unaudited interim results for the six months to 31 December 2004 LONDON: 31 March 2005 - The Board of Firestone Diamonds plc, ("the Company"),the AIM-quoted diamond mining and exploration company, announces unauditedinterim results for the six months to 31 December 2004. HIGHLIGHTS General • After tax profits increased 11% to £162,501 • Rough diamond market very strong; prices increased 20% in 2004 and 3% to date in 2005 • Share placements in July 2004 and March 2005 raised approximately £4.9 million after expenses Orapa and Mopipi, Botswana • Orapa project secured and joint venture signed with De Beers • Intensive work programme under way in Orapa and Mopipi project areas • 51,000 line kilometres of high-resolution geophysical surveys conducted; 180 targets identified to date • Three kimberlites discovered Jwaneng, Botswana • New project secured and joint venture signed with De Beers • Initial work programme under way Groen River Valley, South Africa • Intensive drilling and bulk sampling programme planned; drilling has commenced • Prospecting permit issued for substantial new area Bonte Koe Mine, South Africa • Mine development and commissioning completed • First diamonds produced and sold for $205 per carat Oena Mine, South Africa • Production increased 26% to 457 carats • Average value of diamonds sold increased 10% to $1,158 per carat Avontuur Mine, South Africa • Production decreased 9% to 2,651 carats • Average value of diamonds sold increased 11% to $125 per carat New projects • New exploration and mining projects being evaluated Dear Shareholder, Since June of last year we have made continued good progress in the growth anddevelopment of Firestone's exploration and mining project portfolio. In Botswana, the Company acquired two new kimberlite exploration projects,increased the area held under licence by 150% to approximately 9,000 squarekilometres and concluded two new joint ventures with De Beers over the Orapa andJwaneng projects. An intensive exploration programme was initiated in theMopipi and Orapa project areas, with more than 51,000 line kilometres ofhigh-resolution geophysical surveys conducted. In February 2005, we announcedthat drilling of the first targets identified by these surveys had resulted inthe discovery of three new kimberlites close to the Orapa Mine. In South Africa, the Company increased the area held under licence in the GroenRiver Valley area by 150% to over 50,000 hectares. An intensive follow-upexploration and evaluation programme was developed for the Groen River Valleyarea and drilling in the area commenced at the end of 2004. The main focus of our mining operations was at the Company's new Bonte Koe Mine. Construction of the gravel treatment plant, power line and pipe line, andrefurbishment of buildings and accommodation were completed during the period,following which commissioning of the plant commenced, with the first diamondsbeing recovered in October. REVIEW OF OPERATIONS Exploration Orapa and Mopipi Projects The Mopipi project covers an area of approximately 3,600 square kilometers andis located close to the Orapa and Letlhakane diamond mines. In June 2004, theCompany entered into a joint venture with De Beers over the Mopipi project,under the terms of which De Beers can earn a 61% interest in the project bytaking it to completion of bankable feasibility. During the period, the Company was awarded new prospecting licences for an areaof approximately 1,300 square kilometers, also located close to the Orapa andLetlhakane diamond mines, known as the Orapa project. In December 2004, weannounced that the Company had entered into a new joint venture with De Beersover the Orapa project, on the same commercial terms as those of the Mopipijoint venture. An intensive exploration programme was initiated in the Mopipi and Orapa projectareas. More than 51,000 line kilometres of high-resolution geophysical surveys,including airborne magnetics, ground gravity and ground magnetics, wereconducted. Interpretation of the data from these surveys has identified 180potential kimberlite drilling targets to date for further investigation. DeBeers, which is project operator in the joint ventures with Firestone, hascommenced drilling of selected targets. In February 2005, the Company announced that three new kimberlites had beendiscovered in the Orapa project area, approximately 15 kilometres south of theOrapa Mine. Evaluation of the material recovered from drilling is currentlybeing carried out at De Beers' laboratories in Johannesburg. Microprobeanalysis of the kimberlitic indicator minerals and analysis of the size/distribution frequency of the microdiamond populations from each of thekimberlites is being undertaken so as to allow an initial evaluation of theeconomic potential of the kimberlites to be made. In March 2005, the Company announced that it had entered into a joint venturewith Daly City Ventures, a Botswana company that holds a prospecting licence inthe Orapa region over an area of approximately 380 square kilometers. TheCompany is developing plans for the exploration of this area, which adjoins theMopipi and Orapa project areas. Groen River Valley, Namaqualand, South Africa The Groen River Valley project in Namaqualand is Firestone's most promisingexploration project in South Africa due to the high quality and large size ofdiamonds that have been mined in the area and the large area controlled by theCompany. The pace of exploration activity increased significantly during theperiod. Exploration drilling carried out last year had resulted in a very significantdiscovery and proved the presence of at least one very large gravel deposit thathas been proven to be diamondiferous, known as the HL deposit. During theperiod, plans were developed for an intensive follow-up exploration andevaluation programme. This programme commenced in December 2004, and willinclude detailed drilling and bulk sampling on the HL deposit, follow-updrilling on targets identified by the last year's drilling programme, anddrilling of new targets. As the HL deposit is known to be diamondiferous, theobjective of the bulk sampling programme will be to estimate the grade of thedeposit and diamond value in order to make an initial economic evaluation of thedeposit. In March 2005, we announced that the Company had been awarded a prospectingpermit for a substantial new area in the Groen River Valley region, increasingthe Company's land position by 150% to over 50,000 hectares. The ground coveredby the new prospecting permit adjoins the Company's current project area, and isbelieved to contain significant extensions to the diamondiferous palaeo channelspreviously identified by the Company in the region. Firestone will explore thenew area through its black-empowerment subsidiary, African Star Minerals. Jwaneng, Botswana During the period, the Company was awarded new prospecting licences for an areaof approximately 3,700 square kilometers, located close to the Jwaneng diamondmine. The Jwaneng Mine is the biggest diamond mine in the world, producingapproximately 12 million carats per annum with a value of over $1.5 billion. InDecember 2004, we announced that the Company had entered into a new jointventure agreement with De Beers over the Jwaneng project, on the same commercialterms as those of the Mopipi joint venture. Work commenced on the Jwaneng project in early 2005. Data from explorationrecently carried out by De Beers in the Jwaneng region is being integrated withdata from past kimberlite indicator mineral sampling in order to identify targetareas for follow-up work on the ground. High-resolution ground gravity andmagnetic surveys will be conducted on selected target areas to identifypotential kimberlite drilling targets. Initial drilling targets are expected tobe identified and drilled in the next six months. US Exploration Project Exploration at the Company's kimberlite exploration project in the United Statesover the past two years indicates that at least one previously unknownkimberlite field is located in the project area, and that some of thesekimberlites may be diamondiferous. In June 2004, the Company entered into ajoint venture over the US project with American Diamonds Inc, under the terms ofwhich American Diamonds can earn a 60% interest in the project through theexpenditure of $1 million. Follow-up sampling was carried out during the periodin high priority target areas identified by previous sampling, and the resultsof this work are expected to be available shortly. Mining Bonte Koe Mine, Namaqualand, South Africa The Company's black empowerment joint venture company, African Star Minerals,continued with the development of new mining operations at the Bonte Koe Mine.During the period construction of the gravel treatment plant, power line andpipe line, and refurbishment of accommodation, workshop and office facilitieswere completed. Commissioning of the gravel treatment plant and final recoverysections commenced towards the end of the period. During this process a numberof modifications were made to the plant, including conversion of the feedpreparation section from dry screening to wet screening, in order to optimisegravel throughput and diamond recovery efficiency. All of the requiredmodifications have now been made and commissioning of the plant has beencompleted. A total of 207 carats was recovered during commissioning of the gravel treatmentplant during the period. The average size of the diamonds was 0.51 carats perstone, and 26% of the parcel was comprised of diamonds weighing more than 1carat. A sample parcel of 80 carats was sold during the period for an averageprice of $205 per carat, higher than the $200 per carat that was originallyexpected for Bonte Koe production. Mining operations at Bonte Koe have been focused on excavating and processingmaterial from a number of locations on the property with the objective ofimproving the geological interpretation of the deposits on the mine and allowingmaterial from a number of mining areas to be blended. Grades from areas testedto date range from 1 to 9 carats/100 tonnes. In 2004, the Company decided to increase the capacity of the gravel treatmentplant at Bonte Koe and to construct a 10 km power line and a 35km water pipelineto the mine, with the objective of securing other projects on the Buffels Riverthat could be exploited using this infrastructure. A number of opportunities inthe Buffels River have been identified and are currently being evaluated by theCompany. Avontuur Mine, Namaqualand, South Africa Production for the period was 2,651 carats, a decrease of 9% compared to thesame period last year. This was due to the temporary allocation of some miningequipment from Avontuur to Bonte Koe, although the impact of this was reduced bymore effective utilization of other equipment at Avontuur. Grades from miningareas ranged from 2 to 25 carats/100 tonnes, and diamonds produced continued tobe approximately 85% gem quality, with an average size of 0.23 carats per stone. Demand for Avontuur production remained strong, with the average price for gemquality diamonds sold during the period increasing 4%, to $137 per carat, andoverall value of mine production increasing 11%, to $125 per carat. Exploration activity continued on targets that had been identified by data froma high-resolution airborne electromagnetic survey conducted over the mine areaand which were drilled last year. Bulk sampling of the first of these targetsis being planned for later this year. The Company has also identified a numberof new mining and exploration opportunities in areas close to the mine thatcould be exploited using the infrastructure at Avontuur, and it is expected thatprogress will be made in this regard in the coming year. Oena Mine, Namaqualand, South Africa Meso gravel mining operations were carried out by the Company at the Oenaterrace during the period. Discussions were initiated with a number ofpotential mining contractors with the objective of restarting mining operationsat the Blokwerf and Sandberg terraces. These discussions are still under way.Production from the Company's mining operations at Oena increased 26% to 457carats compared to the same period last year. Grades from mining areascontinued in line with last year, and ranged from 0.06 to 1 carats/100 tonnes,with diamonds produced averaging 1.17 carats per stone. With continued shortages of supply at the high end of the diamond market, demandfor Oena production remained strong. The average price for diamonds soldincreased 10% to $1,158 per carat, primarily due to the sale of a number oflarge, high value stones. A number of special diamonds were recovered duringthe period, including stones of 62.24 and 32.57 carats that sold forapproximately $204,000 and $120,000, respectively. THE DIAMOND MARKET Prices in the rough diamond market continued to increase during the year, drivenby the growing shortage in rough diamond supply across all segments of themarket. Rough diamond prices increased by about 20% in 2004, and this trend hascontinued into 2005, with De Beers raising rough diamond prices by 3% inJanuary. With De Beers' stocks now at minimum working levels, and the roughdiamond supply deficit expected to continue for the next 3-5 years, the outlookfor diamond prices continues to be very positive. FINANCIAL Turnover from Firestone's mining operations increased 7% to £506,310 compared tothe same period last year, with profits rising 11% to £ 162,501, despite thecontinued strength in the rand. In July 2004, the Company completed a share placing with institutional and otherinvestors to raise approximately £1.3 million net of expenses. In March 2005,the Company completed a further share placing with institutional and otherinvestors to raise approximately £3.6 million net of expenses. The primarypurpose of these financings was to increase the pace of exploration at theCompany's key exploration projects and to support further expansion of theCompany's project portfolio. OUTLOOK Through its joint ventures with De Beers and ground that is held exclusively bythe Company, Firestone is the largest holder of diamond exploration rights inthe Orapa region. Firestone is also the only significant holder of diamondexploration rights, other than De Beers, in the Jwaneng region. In addition,the Company has pending applications for a further 15,000 square kilometres inthe Orapa and Jwaneng areas, which, if awarded, would increase the area held bythe Company in Botswana by 170% to 24,000 square kilometres. Much of the area around the Orapa and Jwaneng mines is still considered to behighly prospective for the discovery of new diamondiferous kimberlites, asmodern geophysical and other exploration techniques have not been fully appliedin these areas. This is supported by the recent discovery of three newkimberlites in the Orapa project area. We are confident that further kimberlitediscoveries will be made in our Botswana project areas as drilling continues inthe coming months. Given the fact that more than 10% of the 75 knownkimberlites in the Orapa region are economic, the Company continues to believethat the prospects for new economic discoveries are very good. The Company has now established a dominant land position in the Groen RiverValley. We believe that the current phase of work will make significantprogress towards confirming the economic potential of the area, and that theGroen River Valley has the potential to become an important new alluvial diamondproducing region. We will continue to focus the Company's resources on the identification of newexploration and mining projects, and expect to be able to announce a number ofnew projects as a result of this work in the coming year. We will also continueto work with joint venture partners on a selective basis in order to allow us toaccelerate the development and expansion of our project portfolio. The Company has a strong management team, an exciting portfolio of explorationand mining projects and is well funded. With the strength in the rough diamondmarket expected to continue in the medium term, we remain confident about theCompany's long term prospects. James F. Kenny Chairman 31 March 2005 FIRESTONE DIAMONDS PLC UNAUDITED CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE SIX MONTHS TO 31 DECEMBER 2004 2004 2003 £ £ Turnover 506,310 475,134Change in stocks of finished goods and inwork in progress (10,993) (7,191) Production 495,317 467,944 Other operating income - 3,105Raw materials and consumables (59,800) (57,853)Staff costs (115,709) (76,597)Depreciation and amortisation (62,192) (57,639)Other operating charges (104,417) (149,479) Operating profit 153,199 129,481 Interest receivable and similar income 9,428 19,306Interest payable and similar charges (126) (2,446) Profit on ordinary activities before taxation 162,501 146,341 Deferred tax on profit on ordinaryactivities (22,489) (11,938) Profit on ordinary activities after taxation Minority interests 140,012 134,404 (6,423) (4,357) Retained profit for the period 133,588 130,047 Earnings per shareBasic profit per share 0.3p 0.3p Diluted profit per share 0.3p 0.3p Turnover is wholly derived from continuing activities. FIRESTONE DIAMONDS PLC UNAUDITED CONSOLIDATED BALANCE SHEET 31 DECEMBER 2004 2004 £ £FIXED ASSETSIntangible assets 11,739,143Tangible assets 4,658,739Investments 660,960 17,058,842 CURRENT ASSETSStocks 109,785Debtors 312,504Cash at bank and in hand 497,933 920,221 CREDITORSAmounts falling due within one year (797,280) NET CURRENT ASSETS 122,941 TOTAL ASSETS LESS CURRENT LIABILITIES 17,181,783 CREDITORSAmounts falling due after one year (1,638,554) PROVISIONS FOR LIABILITIES AND CHARGESOther provisions (1,061,934)Deferred taxation (469,013) (1,530,947) NET ASSETS 14,012,281 CAPITAL AND RESERVESCalled up share capital 8,737,372Share premium account 5,320,353Merger reserve (1,076,399)Profit and loss account 1,033,414 EQUITY SHAREHOLDERS' FUNDS 14,014,740Minority equity interests (2,459) 14,012,281Note:As no interim balance sheet was produced in 2003, comparative numbers are notavailable FIRESTONE DIAMONDS PLC UNAUDITED CONSOLIDATED CASH FLOW STATEMENT FOR THE SIX MONTHS TO 31 DECEMBER 2004 2004 £ £ Net cash (outflow)/inflow from operating activities 1,016,879 Returns on investments and servicing of financeInterest received 9,428Interest element of finance lease payments (126) Net cash inflow from returns oninvestments and servicing of finance 9,301 Capital expenditure and financial investmentPayments to acquire intangible fixed assets (1,094,310)Payments to acquire tangible fixed assets (1,081,354)Receipts from sales of tangible fixed assets -Payments to acquire investments 2,051 Net cash outflow from capital expenditureand financial investment (2,173,613) Net cash outflow before use ofliquid resources and financing (1,147,433) FinancingNew long term loans -Issue of ordinary share capital 1,384,849Finance lease payments (80,806) 1,384,849 Increase/(decrease) in cash 156,610 Note:As no interim cash flow statement was produced in 2003, comparative numbers are notavailable Notes: 1. The financial statements have been prepared in accordance withapplicable UK accounting standards and under the historical cost convention.The principal accounting policies of the group are set out in the group's 2004annual report and financial statements. 2. The financial information set out above does not constitutestatutory accounts as defined in section 240 of the Companies Act 1985.Statutory accounts for the twelve months to 30 June 2004, on which the report ofthe auditors was unqualified and did not contain a statement under section 237of the Companies Act 1985, have been filed with Registrar of Companies. 3. Basic earnings per share is based on the weighted average numberof shares in issue for the period of 42,860,459. Diluted earnings per share isbased on the weighted average number of shares in issue for the period pluspotential dilutive ordinary shares arising from share options for the period of47,565,943. 4. The directors are not declaring a dividend for the period. 5. Copies of this report are being sent to all shareholders.Additional copies will be available to the public from the offices of BellLawrie White, 48 St Vincent Street, Glasgow, G2 5TS and will be posted on theCompany's website at www.firestonediamonds.com. 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 Laurence Read, Conduit PR +44 797 995 5923 Jamie Cumming, Bell Lawrie White +44 141 314 8103 Website: www.firestonediamonds.com This information is provided by RNS The company news service from the London Stock Exchange