31 Mar 2011 07:00
Firestone Diamonds plc
Unaudited interim results for the six months to 31 December 2010
LONDON: 31 March, 2011
The Board of Firestone Diamonds plc, ("Firestone" or "the Company"), the AIM-quoted diamond mining and exploration company (ticker: AIM:FDI), announces unaudited interim results for the six months to 31 December 2010.
HIGHLIGHTS
Liqhobong Mine, Lesotho
• | Acquisition of Kopane Diamond Developments plc | |
- | Acquisition completed at the end of September 2010 | |
- | 91 Mt resource identified at an average grade of 34 cpht; contains 31 million carats with a gross value of $3 billion | |
• | Production Plant 1 | |
- | Production commenced ahead of schedule in February 2011 | |
- | Grades and diamond quality from initial production in line with expectations | |
- | Plans to triple capacity of Plant 1 by end 2011 on schedule | |
• | Production Plant 2 | |
- | Development decision for Plant 2, with planned capacity of 4.2 mtpa and expected revenue of $140 million per annum, to be accelerated to end 2011 | |
• | Diamond sales | |
- | 12,510 carats sold at average price of $98/carat | |
BK11 Mine, Botswana
• | Mining | |
- | Mining licence granted and production commenced in July 2010 | |
- | Mining progressing well, with pit depth now approximately 30 metres | |
- | 11.5 Mt of kimberlite to be mined at an average grade of 8.5 cpht | |
• | Production plant | |
- | Phase 1 and Phase 2 of the production plant operational in Q1 2011; throughput reached 90% of target capacity of 1.5 million tpa | |
- | Plant modifications to improve diamond liberation to be completed in Q2 2011 | |
- | Quality of diamonds produced consistent with previous production | |
• | Diamond sales | |
- | 2,162 carats sold at average price of $177/carat | |
Financial & Board
• | Financings | |
- | £13 million raised in December 2010 from share placement | |
- | Terms agreed for $6 million credit facility with Standard Chartered Bank | |
- | Cash position of approximately £9.5 million following draw down of credit facility | |
• | Secondary listing on Botswana Stock Exchange | |
- | Application delayed due to new stock exchange regulations | |
- | Listing expected to take place in Q2 2011 | |
• | Board changes | |
- | P Kenny appointed as Executive Chairman | |
- | T Wilkes to join the board as Chief Executive Officer | |
- | New Finance Director expected to be appointed in Q2 2011 | |
Outlook
• | Liqhobong and BK11 on track for full production in 2011 |
• | Continued strength in the rough diamond market |
• | Target production level of 1 million carats per annum by 2014 |
Tim Wilkes, CEO of Firestone Diamonds, commented: "The prospects for Firestone have been transformed since July 2010. We believe that the Company is very well positioned to become a significant diamond producer in 2011 and to reach its target of producing 1 million carats per annum by 2014".
For further information, visit the Company's web site at www.firestonediamonds.com or contact:
Philip Kenny, Firestone Diamonds Tim Wilkes, Firestone Diamonds
| +44 20 8834 1028/+44 7831 324 645 +27 78 457 6623/+267 713 77686 |
Tim Redfern/Neil Elliot, Evolution Securities (Joint Broker)
| +44 20 7071 4312 |
Rory Scott, Mirabaud Securities (Joint Broker)
| +44 20 7878 3360 |
Alexander Dewar, Brewin Dolphin (Nominated Adviser)
| +44 131 529 0276 |
Jos Simson / Emily Fenton, Tavistock Communications
| +44 20 7920 3150/+44 7899 870 450 |
Dear Shareholder,
The period under review was transformational for Firestone and probably the most significant in the Company's history. The commencement in July 2010 of mining operations at the BK11 Mine in Botswana resulted in Firestone becoming one of only three junior listed kimberlite producers worldwide. In September 2010 Firestone completed the acquisition of Kopane Diamond Developments plc ("Kopane"). This acquisition gave Firestone control of the Liqhobong Mine in Lesotho, which we consider to be a world class asset and one of the most attractive undeveloped kimberlites in the world.
Liqhobong, Lesotho
Firestone owns a 75% interest in the Liqhobong Mine, where a resource of 91 million tonnes ("mt") has been identified at the Main Pipe at an average grade of 34 carats per hundred tonnes ("cpht") and containing 31 million carats. With an average diamond value of $98/carat and a contained value of approximately $3 billion, Liqhobong is considered by the Company to be one of the most attractive undeveloped kimberlites in the world. The current Liqhobong mine plan provides for the mining of approximately 60 mt of kimberlite from the Main Pipe over a period of approximately 17 years and the production of an estimated 19 million carats.
In December 2010 Firestone raised £13 million to finance the recommencement of production at Liqhobong. Production commenced ahead of schedule in February 2011 and grades from initial production have been in line with expectations.
In December 2010 approximately 12,500 carats recovered from mining operations at Liqhobong in 2008 were sold for an average price of $98/carat. About 5,000 carats have been recovered since production recommenced in February 2011. A high quality 15 carat white gem stone, which is a fragment of a larger stone, and two yellow gem stones, of 45 carats and 14 carats, have been recovered in the first six weeks of operation, which is very encouraging.
Plans to triple the capacity of Plant 1 to 1.3 million tonnes per annum ("mtpa") by the end of 2011 are on schedule. At full capacity Plant 1 is expected to generate revenue of $43 million per annum, based on current diamond prices. The Company now plans to accelerate the decision to commence construction of Plant 2, which will have a production capacity of 4.2 mtpa, to the end of 2011. Plant 2 is expected to commence operation in 2013 and to generate revenue of $140 million per annum at full production.
BK11, Botswana
A mining licence for BK11, which is 90% owned by the Company, was granted in July 2010. Under the current BK11 mine plan approximately 11.5 mt of kimberlite is expected to be mined at an average grade of 8.5 cpht, giving total production of approximately 1 million carats over a 10 year mine life at an average value of $155/carat. In the KW area, where the current mining pit is located, an average diamond value of $175/carat is expected.
Commissioning of Phase 1 and Phase 2 of the production plant, which have a combined capacity of 1.5 mtpa, was completed during the period. Material processed through the production plant during the period was sourced from low grade kimberlite stockpiles pending completion of pre-stripping work to expose the target kimberlite ore. Approximately 2,200 carats were recovered from BK11 during the period. These diamonds were sold in December 2010 for an average price of $177/carat.
Pre-stripping was completed in Q4 2010, following which the first kimberlite ore was available for processing. Mining operations are progressing well in 2011. While the production plant has reached 90% of target capacity, a number of problems were encountered with the crushing and scrubbing circuits at the plant, the principal problem being insufficient diamond liberation. Plans to improve diamond liberation are at an advanced stage and expected to be implemented in Q2 2011. Under the current mine plan, an average head feed grade of 9-10 cpht is expected to be achieved in 2011, and the Company is confident that its 2011 production targets will still be achieved.
Botswana Evaluation Projects
In addition to BK11, Firestone controls 21 other kimberlites in the Orapa kimberlite field, of which 13 have been proven to be diamondiferous, and 86 kimberlites in the Tsabong kimberlite field, of which 16 have been proven to be diamondiferous. The Company believes that the likelihood of further economic discoveries being made in these kimberlites is very good. While Liqhobong and BK11 will be the Company's primary focus in 2011, Firestone intends to use cash flow from its mining operations to evaluate these kimberlites with the objective of identifying additional resources that can be developed and brought into production. This work is expected to commence in the second half of 2011.
Financial
The acquisition of Kopane was the most significant event during the period. The acquisition was implemented by way of the issuance of 0.4657 Firestone shares for every Kopane share. As a result of this acquisition, Kopane shareholders were issued with new Firestone shares equivalent to 52% of Firestone's enlarged share capital. In December 2010 the Company raised £13 million through the issue of 52 million ordinary shares at 25 pence per share.
The financial accounts for the period reflect the consolidation of the Kopane accounts from the acquisition date of 29 September 2010. Revenue generated during the period was from mining operations at BK11.
The Company's application for a secondary listing of its shares on the Botswana Stock Exchange, which had been expected to be approved in 2010, has been delayed due to additional requirements being imposed following the introduction of additional listing rules by the Botswana Stock Exchange. The Company expects these additional requirements to be satisfied and the listing to take place in Q2 2011.
During the period the Company agreed terms with Standard Chartered Bank of Botswana for a $6 million, three year, 6.5% fixed rate credit facility. Documentation for the facility is currently being finalised and it is expected to be available for draw down in April 2011. This facility will give the Company greater flexibility in planning and financing its activities elsewhere in Botswana and in Lesotho. Following draw down of this facility in April the Company's cash position is estimated to be approximately £9.5 million. Discussions have also commenced with a number of banks in respect of a debt facility to finance the construction of Plant 2 at Liqhobong.
Board
During the period Firestone indicated that it intended to make a number of changes to its Board of Directors. The Company recently announced the appointment of Philip Kenny, who had been Chief Executive Officer of the Company since it was admitted to AIM in 1998, as Executive Chairman. Mr. Kenny replaced Michael Hampton, who had been acting as Chairman on an interim basis and will remain as a non executive director of the Company. Tim Wilkes, who had been Chief Operating Officer of the Company since 2005, was appointed to the Board as Chief Executive Officer. A new Finance Director with significant experience in mining in Africa is expected to be appointed in Q2 2011.
Outlook
With both Liqhobong and BK11 on track to be in full production in 2011, an exciting portfolio of kimberlites to be evaluated in Botswana, and the continued positive outlook for the rough diamond market, we believe that the prospects for Firestone are very good. The Company is now well positioned to reach its target of producing 1 million carats per annum by 2014.
Philip Kenny
Chairman
31 March 2011
Consolidated Income Statement |
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Six months ended 31 December | Six months ended 31 December | Year ended 30 June |
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2010 | 2009 | 2010 |
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£'000 | £'000 | £'000 |
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Revenue | 1,051 | - | 3 |
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Changes in inventories | 18 | - | - |
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Raw materials and consumables used | (8) | (96) | (180) |
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Employee benefits expense | (634) | (134) | (477) |
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Amortisation and depreciation | (267) | (533) | (369) |
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Impairment of mineral properties | - | 332 | - |
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Impairment of property, plant and equipment | - | - | (200) |
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Release of rehabilitation provisions | - | - | 528 |
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Acquisition expenses | - | - | (1,234) |
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Other operating expenses | (1,611) | (605) | (490) |
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Operating loss | (1,451) | (1,036) | (2,419) |
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Financial income | 14 | 19 | 24 |
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Financial expense | (207) | (7) | (11) |
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Loss before tax | (1,644) | (1,024) | (2,406) |
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Taxation | - | - | - |
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Loss after tax for the period | (1,644) | (1,024) | (2,406) |
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Other comprehensive income/(loss): |
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Exchange differences on translating foreign operations net of tax | 3,378 | (1,151) | 1,135 |
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Total comprehensive income and expense for the period | 1,734 | (2,175) | (1,271) |
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Loss after tax for the period attributable to: |
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Equity shareholders of the parent | (1,801) | (1,024) | (2,478) |
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Non-controlling interest | 157 | - | 72 |
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(1,644) | (1,024) | (2,406) |
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Total comprehensive income for the period attributable to: |
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Equity shareholders of the parent | 3,379 | (1,151) | (1,346) |
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Non-controlling interest | (1) | - | 75 |
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3,378 | (1,151) | (1,271) |
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Basic loss per share - pence | (1.0p) | (1.1p) | (2.3p) |
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Diluted loss per share - pence | (1.0p) | (1.1p) | (2.3p) |
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All amounts relate to continuing operations. |
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31 December | 31 December | 30 June | ||
Consolidated statement of financial position | 2010 | 2009 | 2010 | |
£'000 | £'000 | £'000 | ||
Non-current assets | ||||
Goodwill | - | - | - | |
Intangible mining assets | 66,136 | 17,848 | 20,129 | |
Property, plant and equipment | 20,030 | 11,091 | 14,568 | |
Deferred tax asset | - | - | - | |
86,166 | 28,939 | 34,697 | ||
Current assets |
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Inventories | 705 | 29 | 29 | |
Trade and other receivables | 3,674 | 988 | 1,013 | |
Cash and cash equivalents | 10,832 | 2,438 | 5,645 | |
15,211 | 3,455 | 6,687 | ||
Total assets | 101,377 | 32,394 | 41,384 | |
Equity and liabilities | ||||
Equity attributable to ordinary shareholders | ||||
Share capital | 64,149 | 19,521 | 25,578 | |
Share premium | 39,151 | 22,388 | 25,380 | |
Merger reserve | (1,076) | (1,076) | (1,076) | |
Translation reserve | 4,846 | 1,755 | 429 | |
Accumulated losses | (16,810) | (14,923) | (15,106) | |
Total equity attributable to ordinary shareholders | 90,260 | 27,665 | 32,205 | |
Non-controlling interests | 232 | 98 | 75 | |
Total equity | 90,492 | 27,763 | 35,280 | |
Non-current liabilities | ||||
Interest-bearing loans and borrowings | 524 | 1,491 | 1,193 | |
Deferred tax | 5,702 | - | - | |
Provisions | 97 | - | - | |
6,323 | 1,491 | 1,193 | ||
Current liabilities | ||||
Interest-bearing loans and borrowings | 1,358 | 1,146 | 1,168 | |
Trade and other payables | 2,675 | 1,354 | 3,045 | |
Current tax liabilities | - | - | 229 | |
Provisions | 529 | 640 | 469 | |
4,562 | 3,140 | 4,911 | ||
Total liabilities | 10,885 | 1,831 | 6,104 | |
Total equity and liabilities | 101,377 | 32,394 | 41,384 |
Consolidated statement of cash flows | Six months ended 31 December | Six months ended 31 December | Year ended 30 June | |
2010 | 2009 | 2010 | ||
£'000 | £'000 | £'000 | ||
Cash flows from operating activities | ||||
Loss before tax | (1,644) | (1,024) | (2,406) | |
Adjustments for: | ||||
Depreciation, amortisation and impairment | 267 | 609 | 570 | |
Effect of foreign exchange movements | 2,022 | 642 | 157 | |
Interest payable | 93 | 7 | 11 | |
Equity-settled share-based payment | 97 | 144 | 277 | |
Loss on sale of non-current assets | 206 | - | - | |
Net cash flow from operating activities before changes in working capital and provisions | 1,041 | 378 | (1,391) | |
Increase in inventories | (54) | - | - | |
Decrease/(increase) in trade and other receivables | 2,036 | (46) | (426) | |
(Decrease)/increase in trade and other payables | (2,348) | (453) | 1,926 | |
Decrease/(increase) in provisions | 69 | (270) | (739) | |
Cash generated from/(absorbed) by operating activities | 744 | (391) | (630) | |
Cash flows from investing activities | ||||
Payments for property, plant and equipment | (3,997) | (2,241) | (5,472) | |
Payments for non-current intangible assets | (3,692 | (2,256) | (3,991) | |
Cash acquired with subsidiary | 959 | - | - | |
Net cash from investing activities | (6,730) | (4,497) | (9,463) | |
Cash flows from financing activities | ||||
Proceeds from the issue of share capital | 13,094 | 7,175 | 16,712 | |
Share issue expenses | (1,122) | (380) | (868) | |
Proceeds from long-term borrowings | - | - | 140 | |
Repayment of long-term borrowings | (686) | (357) | (1,082) | |
Repayment of lease finance- | (20) | (7) | (12) | |
Interest paid | (93) | (124) | (171) | |
Net cash from financing activities | 11,173 | 6,307 | 14,719 | |
Net increase in cash and cash equivalents | 5,187 | 1,419 | 4,626 | |
Cash and cash equivalents at the beginning of the period | 5,645 | 1,019 | 1,019 | |
Cash and cash equivalents at the end of the period | 10,832 | 2,438 | 5,645 |
Notes to unaudited consolidated financial statements
1 | Corporate information | |||||||||||||
Firestone Diamonds Plc ("the Company") is a company incorporated in England and Wales and quoted on the London Stock Exchange's Alternative Investment Market. | ||||||||||||||
2 | Basis of preparation | |||||||||||||
These condensed interim financial statements of the Company and its subsidiaries ("the Group") for the six month period ended 31 December 2010 have been prepared using accounting policies consistent with International Financial Reporting Standards (IFRSs). The same accounting policies, presentation and methods of computation are followed in these financial statements as were applied in the Group's latest audited financial statements for the year ended 30 June 2010.
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These condensed interim financial statements have not been audited, do not include all of the information required for full annual financial statements, and should be read in conjunction with the Group's consolidated annual financial statements for the year ended 30 June 2010. The auditors' opinion on these Statutory Accounts was unqualified.
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While the financial figures included within this half-yearly report have been computed in accordance with IFRSs applicable to interim periods, this half-yearly report does not contain sufficient information to constitute an interim financial report as set out in IAS34.
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The comparative figures presented are for the six months ended 31 December 2009 and the year ended 30 June 2010.
The results for the six month period ended 31 December 2009 have been restated to reflect a change in the treatment of share issue costs of £380,000. Initially these costs were expensed in profit and loss. For the full year ended 30 June 2010 these costs were allocated to the share premium account. There is no change to total equity. | ||||||||||||||
3 | Segmental analysis | |||||||||||||
A segment is a distinguishable component of the Group that is engaged in providing products or services in a particular business sector (business segment) or in providing products or services in a particular economic environment (geographic segment), which is subject to risks and rewards that are different to those in other segments. The Group operated during the period in one segment, diamond mining, exploration and development, and in one principal geographic area - Southern Africa. Operations in Botswana and Lesotho are considered to be linked operations.
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The Group also conducts business within the U.K., including the ad hoc raising of funds which are subsequently passed to subsidiary companies, and incurring of expenditure in relation to the Company's activities as a holding company. None of this activity is considered to be significantly different to the principal activity of the Group within the Southern African region.
Financial reports received by the Board are compiled as relating to the single activity based in Southern Africa.
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4 | Earnings per share |
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The calculation of the basic loss per share for the six month period ended 31 December 2010 is based upon the following: |
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Six months ended 31 December | Six months ended 31 December | Year ended 30 June |
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2010 | 2009 | 2010 |
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£ | £ | £ |
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Loss per share - pence | (1.1p) | (1.1p) | (2.3p) |
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Loss attributable to shareholders of the parent | £1,801,000 | £1,024,000 | £2,406,000 |
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Weighted average number of shares in issue | 167,821,340 | 93,121,489 | 103,197,603 |
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The diluted loss per share for all periods is the same as the basic loss per share as the losses have an anti-dilutive effect.
5 | Acquisition of Kopane Diamond Developments plc | |||
On 29 September 2010 the Company acquired the whole of the issued share capital of Kopane Diamond Developments plc ("Kopane"). Kopane is a diamond exploration and mining company whose principal asset is the Liqhobong Mine in Lesotho. Kopane was quoted on AIM until the date of acquisition by the Company (the "Acquisition"). | ||||
The Acquisition was implemented by means of a scheme of arrangement under Part 26 of the Companies Act 2006 (the 'Act') which involved a reduction of capital under Section 641 of the Act. Under the terms of the Acquisition Kopane shareholders received 0.4657 of a new ordinary share in Firestone for every 1 Kopane share held. | ||||
The Kopane acquisition has been accounted for by the purchase method of accounting and the results of Kopane are included in the interim financial statements for the period 30 September 2010 to 31 December 2010. The provisional book values and fair-values of the Kopane assets and liabilities acquired are set out below.
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On 29 September 2010 the Company acquired the whole of the issued share capital of Kopane Diamond Developments plc ("Kopane"). Kopane is a diamond exploration and mining company whose principal asset is the Liqhobong Mine in Lesotho. Kopane was quoted on AIM until the date of acquisition by the Company (the "Acquisition"). | ||||
Provisional |
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Book value Unaudited | fair value Unaudited |
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£000 | £000 |
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Goodwill | 925 | - |
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Intangible mining assets | 6,089 | 40,505 |
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Property plant and equipment | 3,520 | 1,630 |
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Investment in joint venture | - | - |
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Other investments | - | - |
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Derivative financial instruments | 891 | 2,982 |
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Inventories | 540 | 622 |
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Trade and other receivables | 2,793 | 1,715 |
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Cash | 1,043 | 959 |
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Trade and other payables | (374) | (924) |
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Provisions | (64) | (87) |
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Deferred tax | - | (5,378) |
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_________ | _________ |
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15,363 | 42,024 |
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_________ |
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Fair-value of consideration | 42,024 |
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_________ |
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Goodwill | - |
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_________ |
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The fair-value of the acquired assets is provisional due to the short time available to the Company to assess and investigate the more detailed information on Liqhobong that became available information to it after completion of the Acquisition. Final values will be determined after the assessment is completed and no later than 29 September 2011. |
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The fair-value of the purchase consideration arises from the issue of 140,413,477 ordinary shares of 20p at a price of 28.75p per share, being the market price at 29 September 2010 together with the cost of settling share option arrangements for Kopane employees.
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6 | Dividend |
The directors are not declaring a dividend for the period. |
7 | Other
The information in this statement has been reviewed by Mr. Tim Wilkes, B Sc, Pr Sci Nat, who is a qualified person for the purposes of the AIM Guidance Note for Mining, Oil and Gas Companies. Mr Wilkes is Chief Executive Officer of Firestone Diamonds plc and has over 25 years' experience in diamond exploration, mineral resource management and mining. Mr. Wilkes is a member of the sub-committee for diamonds of the South African Mineral Resource Committee (SAMREC).
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