15 Mar 2012 07:00
Firestone Diamonds plc
Unaudited interim results for the six months to 31 December 2011
LONDON: 15 March 2012
The Board of Firestone Diamonds plc, ("Firestone" or "the Company"), the AIM-quoted diamond mining and exploration company (ticker: AIM: FDI), announces its unaudited interim results for the six months ended 31 December 2011 (H1 2012).
HIGHLIGHTS
Liqhobong Mine, Lesotho
·; Pilot Plant
o 207,845 tons treated in H1 2012 (H2 2011: 72,991 tons)
o 70,192 carats produced (H2 2011: 23,296 carats) at a grade of 33.77 carats per hundred tons (cpht)
o Further plant improvements underway to reduce large stone breakages and increase throughput
·; Main Treatment Plant
o Definitive Feasibility Study (DFS) on track for completion in June 2012
·; Diamond sales
o 42,802 carats sold during H1 2012 (H2 2011: 17,082 carats) at an average price of $59/carat (H2 2011: $140/carat).
o H1 2012 $/carat reduction attributable to general diamond price weakening and the average smaller size of stones included in the tender.
BK11 Mine, Botswana
·; Operations
o 9,910 carats produced at 2.5 cpht
o Further plant improvements including connection to lower cost main electrical power grid
o Operations placed on care and maintenance on 27 February 2012
·; Diamond sales
o 8,168 carats sold in H1 2012 (H2 2011: 4,277 carats) at an average price of $133/ct (H2 2011: $233/carat).
Financial & Board
·; Financing activities
o £12.8 million net of expenses raised in July and August 2011 from a private share placement
·; Investment activities
o £5.6 million invested in property, plant and equipment
·; £4.2 million cash on hand on 31 December 2011
·; Board changes
o Mr Abraham Jonker appointed as non-executive director and James Kenny resigned as non-executive director during December 2011
o Mr Philip Kenny resigned as executive chairman during January 2012 and Mr Lucio Genovese appointed in his stead as non-executive chairman.
Post Period-end Summary
·; Conditional placing of £14.7 million and Capital Reorganisation
Outlook
·; Further investments in the Pilot Plant at Liqhobong expected to reduce diamond breakages and increase plant throughput
·; Strategic focus now on major development at Liqhobong.
Tim Wilkes, CEO of Firestone Diamonds, commented: "The higher than expected cash outflows in H1 2012 are mainly due to the general weakness in the diamond price experienced from July 2011 combined with technical challenges experienced at both the Liqhobong and BK11 plants. With the restructuring that has been undertaken, the Company is now focused on increasing Liqhobong's revenue per carat production in 2012 and in developing the Main Treatment Plant in order to reach our target of producing over 1 million carats per annum by 2015, whilst achieving the required run rate by Q4 2014".
Extracts of the Interim Results appear below with a full version available on the Company's website. For further information, visit the Company's web site at www.firestonediamonds.com or contact:
Tim Wilkes, Firestone Diamonds | +267 713 77686 / +44 20 8741 7810 |
Rory Scott, Mirabaud Securities (Nominated Broker)
| +44 20 7878 3360 |
Robert Beenstock, N+1 Brewin (Nominated Adviser)
| +44 20 3201 3170 |
Jos Simson / Emily Fenton, Tavistock Communications
| +44 20 7920 3150/+44 7899 870 450 |
Dear Shareholder,
The disappointing operating and financial results reported for the period can be attributed to the weakening diamond market and technical issues at the BK11 and Liqhobong processing plants. As a result, the Company has undergone a strategic review which has resulted in the focus on developing Liqhobong's full potential for long term value creation with the emphasis on the Main Treatment Plant, where a DFS is on track for completion in June of this year. Furthermore, the BK11 Mine in Botswana has been placed on temporary care and maintenance as of 27 February 2012. This is as a precautionary measure due to the technical challenges encountered combined with a weaker diamond market for the smaller stones. We remain fully committed to BK11 and the care and maintenance programme has been designed to enable a rapid re-start when the technical and market challenges have been resolved.
Liqhobong, Lesotho
Production at Liqhobong has been increased from 65 tons per hour to 85 tons per hour during the period under review and will be increased to over 100 tons per hour during the second half of the 2012 financial year due to further planned improvements to the Pilot Plant which will also reduce large diamond stone breakages.
42,802 carats were sold at an average price of $59/carat realising $2.5 million. This price is well off the $123/carat realised at our June 2011 tender and was negatively affected by the general decrease in diamond prices that affected the smaller near gem quality part of the assortment as well as the average smaller size stones included in the tender.
The Main Treatment Plant's DFS commenced during the period under review and is scheduled to be completed in June 2012.
BK11, Botswana
The BK11 plant has been negatively affected by the lack of in-line secondary and tertiary crushing and the processing of lower grade material in the first 40 - 60 m of the ore body. In-line secondary crushing units were installed in December 2011, as was the connection to the national electricity power grid.
Cut one stripping has been completed and cut two needs to commence to expose the higher grade coarser ore body prevalent from 50 m below surface. At a stripping cost of $5m management has deemed it prudent to put BK11 on temporary care and maintenance to conserve cash and allow diamond prices to recover prior to making these considerable investments.
Botswana Evaluation Projects
Kimberlite prospecting licences in the Kokong area of Botswana have been added to our Tsabong and Orapa satellite licences. Firestone possesses the largest and arguably the best diamond prospecting licences in Botswana and with Botswana having the best worldwide success rate in converting exploration interests into mines, these assets are well positioned to be developed into producing mines. The Company is currently assessing ways to unlock the potential value of its exploration portfolio.
Financial
£13.5 million gross (£12.8 million net of expenses) was raised in a private placement in July and August at 27.75 pence. The Company's cash balance at 31 December was £4.2 million.
Outflow of funds totalled £12.8m during the period under review and included expenditure of £1.3m on debt and interest repayments, £5.6m on property, plant and equipment, and £5.9m from operations. The outflow from operations was affected by reduced diamond sales prices resulting in £2.2m less revenue than expected. This fall reflects the global reduction in diamond prices. Increased working capital absorbed £0.6m. There were £3.1m of increased operational expenses due to ramp-up delays.
The principal mining assets of the Group are held in Lesotho and Botswana. During the period under review the Lesotho Loti has devalued 15.5% and the Botswana Pula 10.5% when compared to Sterling. This has resulted in a fall in the Sterling value of the Group's assets denominated in these currencies, which is reflected as a negative exchange difference in the translation of foreign assets of £6.75m included in other comprehensive income. For further clarity, these exchange differences are not included in the Group's earnings per share calculation.
Firestone also gained a secondary listing on the Botswana Stock Exchange in July 2011.
Board Changes
Mr Abraham (Braam) Jonker was appointed as a non-executive director on 14 December 2011 and Mr James Kenny resigned as non-executive director on 30 December 2011
Mr Philip Kenny resigned as executive chairman on 16 January 2012 and Mr Lucio Genovese was appointed in his stead on 17 January 2012 as non-executive chairman.
Placing and Capital Reorganisation
The Company also announces today a £14.7 million placing and Capital Reorganisation. The completion of both the placing and capital reorganisation is conditional on shareholder approval, and is the culmination of a significant review by the Board over the past few months as Firestone continues to develop its major assets. I believe that this transaction will give the Company a strong platform to execute on its strategic objectives.
Outlook
The strategic focus of the Company has now shifted to improved diamond value management and the development of the Main Treatment Plant at Liqhobong. To this end, planned investments in the pilot plant at Liqhobong are expected to increase production and reduce diamond breakages over the short term and the Main Treatment Plant's DFS is on track for completion in June 2012.
The Company is also in the process of reviewing its strategy in relation to its exploration portfolio and will provide an update to the market in this regard in due course.
Lucio Genovese
Non- Executive Chairman
15 March 2012
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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2011 | 2010 | 2011 |
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Restated |
Restated |
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£'000 | £'000 |
£'000 |
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Revenue | 1,973 | 1,051 | 2,453 |
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Raw materials and consumables used | (4,966) | 10 | (819) |
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Employee costs | (2,273) | (634) | (829) |
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Compensation to former employees of Kopane | - | - | (585) |
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Amortisation and depreciation | (2,094) | (267) | (899) |
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Exploration expenses | - | (187) | (217) |
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Other operating expenses | (623) | (1,611) | (1,383) |
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Impairment of intangible assets | (615) | - | - |
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Operating loss | (8,598) | (1,638) | (2,279) |
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Financial income | 21 | 14 | 19 |
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Financial expense | (182) | (207) | (753) |
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Loss before tax | (8,759) | (1,831) | (3,013) |
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Taxation | 29 | - | (317) |
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Loss after tax for the period | (8,730) | (1,831) | (3,330) |
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Other comprehensive (loss)/income: |
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Exchange differences on translating foreign operations net of tax | (6,750) | 3,222 | 106 |
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Total comprehensive income and expense for the period | (15,480) | 1,391 | (3,224) |
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Loss after tax for the period attributable to: |
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Equity shareholders of the parent | (7,780) | (1,988) | (3,215) |
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Non-controlling interest | (950) | 157 | (115) |
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(8,730) | (1,831) | (3,330) |
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Total comprehensive income for the period attributable to: |
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Equity shareholders of the parent | (14,530) | 1,263 | (3,109) |
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Non-controlling interest | (950) | 128 | (115) |
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(15,480) | 1,391 | (3,224) |
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Basic loss per share - pence | (2.2p) | (1.2p) | (1.2p) |
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Diluted loss per share - pence | (2.2p) | (1.2p) | (1.2p) |
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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 | 2011 | 2010 | 2011 | ||
Restated | Restated | ||||
£'000 | £'000 | £'000 | |||
Assets | |||||
Non-current assets | |||||
Intangible assets | - | 615 | 615 | ||
Property, plant and equipment | 69,847 | 65,179 | 73,698 | ||
69,847 | 65,794 | 74,313 | |||
Current assets |
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Inventories | 2,525 | 705 | 1,853 | ||
Trade and other receivables | 1,664 | 3,674 | 2,479 | ||
Derivative financial instruments | 64 | - | 781 | ||
Cash and cash equivalents | 4,194 | 10,832 | 4,256 | ||
8,447 | 15,211 | 9,369 | |||
Total assets | 78,294 | 81,005 | 83,682 | ||
Equity and liabilities | |||||
Equity | |||||
Share capital | 74,523 | 64,149 | 64,792 | ||
Share premium | 42,271 | 39,151 | 39,198 | ||
Merger reserve | (1,076) | (1,076) | (1,076) | ||
Translation reserve | (6,187) | 3,708 | 563 | ||
Accumulated losses | (44,655) | (35,728) | (36,922) | ||
64,876 | 70,204 | 66,555 | |||
Non-controlling interests | 537 | (84) | 1,779 | ||
Total equity | 65,413 | 70,120 | 68,334 | ||
Non-current liabilities | |||||
Interest-bearing loans and borrowings | 2,024 | 524 | 2,736 | ||
Deferred tax | 2,933 | 5,702 | 3,308 | ||
Other payables | 368 | - | - | ||
Provisions | 1,353 | 97 | 1,247 | ||
6,678 | 6,323 | 7,291 | |||
Current liabilities | |||||
Interest-bearing loans and borrowings | 1,795 | 1,358 | 2,362 | ||
Trade and other payables | 3,976 | 2,675 | 5,197 | ||
Provisions | 432 | 529 | 498 | ||
6,203 | 4,562 | 8,057 | |||
Total liabilities | 12,881 | 10,885 | 15,348 | ||
Total equity and liabilities | 78,294 | 81,005 | 83,682 | ||
Consolidated statement of cash flows | Six months ended 31 December | Six months ended 31 December | Year ended 30 June | |
2011 | 2010 | 2011 | ||
Restated | Restated | |||
£'000 | £'000 | £'000 | ||
Cash flows from operating activities | ||||
Loss before tax | (8,759) | (1,831) | (3,013) | |
Adjustments for: | ||||
Depreciation, amortisation and impairment | 2,709 | 267 | 1,435 | |
Effect of foreign exchange movements | 613 | 2,022 | (85) | |
Interest payable | 58 | 93 | 116 | |
Equity-settled share-based payment | 47 | 97 | 13 | |
(Profit)/loss on sale of non-current assets | (20) | 206 | - | |
Loss on sale of derivative financial instruments | - | - | 637 | |
Net cash flow from operating activities before changes in working capital | (5,352) | 854 | (897) | |
Increase in inventories | (672) | (54) | (1,202) | |
Decrease in trade and other receivables | 1,532 | 2,036 | 895 | |
(Decrease)/increase in trade and other payables | (1,488) | (2,348) | 1,516 | |
Decrease/(increase) in provisions | 40 | 69 | (59) | |
Net cash flow from operating activities | (5,940) | 557 | 253 | |
Investing activities | ||||
Payments for property, plant and equipment | (5,606) | (7,502) | (17,628) | |
Cash acquired with subsidiary | - | 959 | 956 | |
Disposal of non-current assets | 20 | - | 13 | |
Net cash flow from investing activities | (5,586) | (6,543) | (16,659) | |
Financing activities | ||||
Issue of ordinary shares | 13,500 | 13,094 | 13,786 | |
Share issue expenses | (697) | (1,122) | (1,122) | |
Proceeds from long-term borrowings | - | - | 3,633 | |
Repayment of long-term borrowings | (1,248) | (686) | (1,049) | |
Repayment of lease finance | (33) | (20) | (40) | |
Interest paid | (58) | (93) | (191) | |
Net cash from financing activities | 11,464 | 11,173 | 15,017 | |
Net increase in cash and cash equivalents | (62) | 5,187 | (1,389) | |
Cash and cash equivalents at the beginning of the period | 4,256 | 5,645 | 5,645 | |
Cash and cash equivalents at the end of the period | 4,194 | 10,832 | 4,256 |
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
| 1 | Corporate information |
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| Firestone Diamonds Plc ("the Company") is incorporated in England and Wales and quoted on the London Stock Exchange's AIM market. |
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| 2 | Basis of preparation |
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| These condensed interim financial statements of the Company and its subsidiaries ("the Group") for the six months ended 31 December 2011 have been prepared using accounting policies consistent with International Financial Reporting Standards (IFRSs). With the exception of the change in accounting policy referred to in note 5 below, 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 2011.
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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 2011. The auditors' opinion on these Statutory Annual Accounts was unqualified. The auditor's report also did not contain a statement under Section 498 (2) or 498 (3) of the Companies Act 2006.
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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 Interim Financial Reporting.
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| The comparative figures presented are for the six months ended 31 December 2010 and the year ended 30 June 2011. |
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| 3 | Going concern |
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| The Company's business activities, together with the factors likely to affect its future development are set out in the Chairman's Statement. As discussed in the Chairman's Statement, the Company's focus in 2012 is on increasing production and reducing diamond breakages at the Liqhobong pilot plant and completing the feasibility study of the Liqhobong main treatment plant.
On 15 March 2012, the Directors announced that the Company has conditionally raised £14.7 million, subject to shareholders approval. On that basis, the directors continue to adopt the going concern basis in preparing these financial statements. Though the directors are confident that the Company will continue to have the ability to access sufficient levels of finance to continue the Group's projects for the foreseeable future, there can be no certainty that these funds will be available.
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4 | Loss per share |
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| The calculation of the basic loss per share for the six months 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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| 2011 | 2010 | 2011 |
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| £ | £ | £ |
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| Loss per share - pence | (2.2p) | (1.2p) | (1.2p) |
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| Loss attributable to shareholders of the parent | £7,780,000 | £1,988,000 | £3,215,000 |
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| Weighted average number of shares in issue | 356,484,910 | 167,821,340 | 264,731,812 |
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| The diluted loss per share for all periods is the same as the basic loss per share as the potential ordinary shares to be issued do not have an anti-dilutive effect.
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7 Other
The information in this statement has been reviewed by Mr. Tim Wilkes, BSc, 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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8 | Effect on the net assets and loss after tax |
Previously stated | Adjustment | Restated |
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£'000 | £'000 | £'000 |
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Net assets: | |||||||||||
30 June 2010 | 35,280 | (18,991) | 16,289 |
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31 December 2010 | 90,492 | (20,372) | 70,120 |
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30 June 2011 | 88,174 | (19,840) | 68,334 |
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Loss after tax attributable to equity shareholders: |
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31 December 2010 | (1,801) | (187) | (1,988) |
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30 June 2011 | (2,998) | (217) | (3,215) |
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