| Tue 31 Mar 2009, 8:30 | | DMC - DiamondCorp Plc - Audited Results for the Year Ended 31 December 2008 |
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DMC
DMC
DMC - DiamondCorp Plc - Audited Results for the Year Ended 31 December 2008
DiamondCorp Plc
JSE share code: DMC & AIM share code: DCP
ISIN: GB00B183ZC46
(Incorporated in England and Wales)
(Registration number 05400982)
(SA company registration number 2007/031444/10)
("DiamondCorp" or "the Company")
AUDITED RESULTS FOR THE YEAR ENDED 31 DECEMBER 2008
DiamondCorp plc, the South African diamond mine development and
exploration company, releases its audited results for the period ended 31
December 2008.
Highlights
- Lace tailings re-treatment recovered 50,521 carats of diamonds in the year
from 803,810 tonnes.
- Recoveries averaged 6.28 carats per hundred tonnes (cpht) and approximately
70% of diamonds recovered were gem quality. Recoveries improved to 7.23 cpht in
Q4 following re-commissioning of the recrush circuit.
- 31,906 carats of gem diamonds were sold at tender in Johannesburg for an
average price of US$54 per carat (2007 - US$59 per carat).
- Diamond prices suffered a significant drop in the second half, with final
tender sales in November achieving 50 per cent of the prices received earlier in
the year. As a result tailings re-treatment is no longer economic and this
activity has ceased.
- Revenue for the year was GBP916,767 (2007 - GBP74,795)
- Operating loss for the year was GBP3,605,109 (2007 - GBP2,168,743).
- Access to potentially high-grade, high-value coherent kimberlite from the Main
pipe was accelerated.
- GBP3.55 million of equity capital was raised through two share placements
during the year, and a project loan of US$5.0 million was secured, providing all
the required debt and equity for the Phase Two.
Post Period Highlights
- A 21-year mining right was executed with the Department of Minerals and Energy
for the Phase Two Lace underground development.
- Initial mining of kimberlite from the Satellite pipe has commenced and is
being stockpiled while a new primary crushing circuit is commissioned.
CONSOLIDATED INCOME STATEMENT
Year ended 31 December 2008
Note 2008 2007
GBP GBP
Revenue 916,767 74,795
Cost of sales (1,494,253) (189,403)
GROSS LOSS (577,486) (114,608)
Administrative expenses (3,027,623) (2,054,135)
OPERATING LOSS 3 (3,605,109) (2,168,743)
Investment revenues 32,043 112,492
Finance costs (682,286) -
LOSS BEFORE TAX (4,255,352) (2,056,251)
Tax 6 (30,132) (45,000)
LOSS FOR THE FINANCIAL YEAR 18 (4,285,484) (2,101,251)
ATTRIBUTABLE TO THE EQUITY HOLDERS OF (4,285,484) (2,101,251)
THE PARENT
BASIC AND DILUTED LOSS PER SHARE 7 (11.65p) (6.27p)
HEADLINE LOSS PER SHARE 7 (11.55p) (6.26p)
All of the activities of the Group are classed as continuing.
CONSOLIDATED BALANCE SHEET
Year ended 31 December 2008
Note 2008 2007
GBP GBP
NON-CURRENT ASSETS
Goodwill 8 4,606,026 4,606,026
Other intangible assets 8 2,311,232 1,445,567
Property, plant and 9 5,644,476 4,958,689
equipment
Deferred tax asset 15 57,723 -
12,619,457 11,010,282
CURRENT ASSETS
Inventories 11 463,822 986,049
Other receivables 12 566,730 136,495
Cash and cash equivalents 3,252,276 1,330,707
4,282,828 2,453,251
TOTAL ASSETS 16,902,285 13,463,533
CURRENT LIABILITIES
Obligations under finance (91,269) -
leases
Other payables 13 (667,375) (198,609)
Provisions (9,241) -
(767,885) (198,609)
NON-CURRENT LIABILITIES
Long term loan 14 (3,399,709) -
NET ASSETS 12,734,691 13,264,924
EQUITY
Share capital 17 1,232,610 1,043,112
Share premium account 18 17,460,220 14,116,306
Warrant reserve 18 710,514 740,949
Share option reserve 18 320,261 282,790
Translation reserve 18 209,339 82,537
Retained losses 18 (7,198,253) (3,000,770)
TOTAL EQUITY 12,734,691 13,264,924
STATEMENT OF CHANGES IN EQUITY
Year ended 31 December 2008
2008 2007
GBP GBP
GROUP
Opening balance 13,264,924 9,018,355
Loss for financial year (4,285,484) (2,101,251)
New equity share capital subscribed 189,498 301,000
Premium on new equity share capital 3,343,914 5,582,211
subscribed
Value attributed to warrants granted 57,566 99,282
Value attributed to share options 37,471 282,790
granted
Translation reserve 126,802 82,537
Closing balance 12,734,691 13,264,924
CONSOLIDATED CASH FLOW STATEMENT
Year ended 31 December 2008
2008 2007
GBP GBP
Operating loss (3,605,109) (2,168,743)
Depreciation and amortisation 645,860 297,954
Share based payment charge 37,471 282,790
Other gains and losses 3,998 49,159
Loss on disposal of property plant and 39,642 3,322
equipment
Finance costs (7,913) -
Decrease (increase) in receivables (430,235) 123,259
Decrease (increase) in inventories 522,227 (74,283)
Increase (decrease) in payables 569,276 (433,516)
Effect of foreign exchange translation (85,894) 284,849
NET CASH USED IN OPERATING ACTIVITIES (2,310,677) (1,635,209)
INVESTING ACTIVITIES
Purchase of intangible assets (883,365) (461,043)
Purchase of property, plant and equipment (1,334,611) (1,740,069)
Interest received 32,043 112,492
NET CASH USED IN INVESTING ACTIVITIES (2,185,933) (2,088,620)
FINANCING ACTIVITIES
New long term loan raised 2,846,246 -
Proceeds on issue of ordinary shares 3,533,412 2,267,335
NET CASH FROM FINANCING ACTIVITIES 6,379,658 2,267,335
NET INCREASE (DECREASE) IN CASH AND CASH 1,883,048 (1,456,494)
EQUIVALENTS
CASH AND CASH EQUIVALENTS AT BEGINNING OF 1,330,707 2,822,089
YEAR
Effect of foreign exchange rate changes 38,521 (34,888)
CASH AND CASH EQUIVALENTS AT END OF YEAR 3,252,276 1,330,707
1. BASIS OF PREPARATION AND ACCOUNTING POLICIES
General information
DiamondCorp plc is a Company incorporated in England and Wales under the
Companies Act 1985.
These financial statements are presented in pounds sterling because that is the
currency of the parent Company of the Group. Foreign operations are included in
accordance with the policies set out in this note.
a) Adoption of new and revised International Financial Reporting Standards
Three interpretations issued by the International Financial Reporting
Interpretations Committee are effective for the current period. These are IFRIC
11 IFRS2: Group and Treasury Share Transactions; IFRIC 12 Service Concession
Arrangements; and IFRIC 14 IAS 19 The Limit of a Defined Benefit Asset, Minimum
Funding Requirements and their Interaction. The adoption of these
interpretations has not led to any changes in the Group`s accounting policies.
b) Basis of preparation
DiamondCorp plc was incorporated on 22 March 2005. On 15 May 2006 the Company
acquired the entire issued share capital of Crown Diamond Mining Limited which
changed its name to Diamondcorp Holdings Limited in 2007 (DHL). DHL owns 74% of
the issued share capital of Lace Diamond Mines (Pty) Limited.
The financial statements have been prepared in accordance with International
Financial Reporting Standards. The financial statements have been prepared on
the historical cost basis. The financial statements have also been prepared in
accordance with IFRSs adopted by the European Union and therefore the Group
financial statements comply with Article 4 of the EU IAS Regulation. The
principal accounting policies adopted are set out below.
The financial statements are prepared on a going concern basis. The accounting
policies are consistent with those of the prior year.
LOSS PER SHARE
a) Basic loss per share
Basic loss per share is calculated by dividing the loss for the year by the
weighted average number of shares in issue during the year. The weighted average
number of shares used is 36,772,136 (2007 - 33,501,444).
b) Diluted loss per share
International Accounting Standard 33 requires presentation of diluted earnings
per share when a company could be called upon to issues shares that would
decrease the net profit or increase the net loss per share. For a loss making
company with outstanding options, net loss per share would only be increased by
the exercise of out-of-money options. Since it seems inappropriate to assume
that option holders would exercise out-of-money options, no adjustment has been
made to diluted loss per share for out-of-money share options.
c) Headline loss per share
The Group presents an alternative measure of loss per share after excluding all
capital gains and losses from the loss attributable to ordinary shareholders.
The impact of this is as follows:
2008 2007
Basic
Loss per share (11.65p) (6.27p)
Effect of loss on disposal of property, 0.10p 0.01p
plant and equipment
Adjusted loss per share (11.55p) (6.26p)
The full notes to the annual financial results have been included in the annual
report which has been posted to shareholders.
AUDIT OPINION
The auditors, Deloitte LLP, have audited the annual financial statements for the
year ended 31 December 2008. A copy of their unqualified audit report is
available for inspection at the company`s registered office.
CHAIRMAN`S STATEMENT
(An abridged version of the Chairman`s Statement from the annual report to
shareholders)
Dear Shareholders,
You will be acutely aware of the current state of the financial markets. Mining
is one of the first sectors to suffer in such a bear market and particularly
small miners, when investors question whether they have the finance, or indeed
the right projects, to stay afloat. I will not dwell on this in my report, other
than to note that our share price has out-performed many in our peer group. This
was partially as a result of our shares being tightly-held, introducing a major
new shareholder and not having to face hedge fund investor distress or large
scale redemptions. However, we also believe that our out-performance is due to
the fundamental strength of our primary asset and the significant progress made
towards bringing the Lace Diamond Mine into full underground production more
than a year ahead of schedule. At peak production, Lace is expected to produce
more than 500,000 carats of diamonds per year.
I hope in this report that we provide shareholders with some insight into the
delivery by your Company on our objectives during the year, and how DiamondCorp
is positioned, not only to weather current markets, but to grow and thrive in
the medium to longer term.
Looking back on the 2008 financial year, I am pleased to report that there have
been several highlights, including:
- The recovery of some 50,000 carats of diamonds from the tailings re-treatment
operation.
- Continued and accelerated development of the Phase 2 Lace Underground Mine,
with bulk sampling commencing from the Satellite Pipe by the end of 2008.
- Granting of Mining Rights for Phase 2, providing security of tenure for at
least 20 years.
- Construction and early commissioning of the primary crushing circuit by March
2009, ahead of schedule.
- Raising all requisite funding for Phase 2 development, through equity capital
and a project loan.
Production from the tailings retreatment operation continued during the year,
yielding 50,521 carats of diamonds, and generating revenues of US$1,707,000
(GBP916,767). Pleasingly, around 70% of the diamonds recovered were of gem
quality, confirming our expectations of what we will face when we start
production from the Main Pipe. While the tailings retreatment operation was
suspended at the end of 2008 since the diamond price fall had rendered it
uneconomic, its real value has been in developing and testing the operating
circuit in advance of full underground production. The value of this cannot be
underestimated. This year-long learning curve helped us to identify and overcome
teething problems and resulted in the successful re-commissioning of the re-
crush circuit in the fourth quarter. Shareholders can also be assured that we
will bring to account the stones remaining in the tailings dump, when diamond
prices rise.
Given the state of the markets, the decision in 2007 to accelerate the
development of Phase 2 of the Lace underground mine in order to access rapidly
the higher-grade kimberlite has proven both timely and fortuitous. Good progress
has been made with the project, with the recent commencement of underground bulk
sampling from the Satellite Pipe. This will be followed by access to the Main
Pipe by mid year. Assuming that the diamond grade of Lace kimberlites allows us
to be profitable at current prices, mining will then commence and increase to
around 3,000 tonnes per day in the second half of 2009, reaching full production
of 4,000 tonnes per day when the vertical shaft is refurbished in 2010.
Fully Funded to Production
During 2008, we were very pleased to attract the considered attention of and
investment by the European Islamic Investment Bank plc (EIIB) into your company,
as a cornerstone shareholder at a time when robust shareholder support can be
critical to a company`s success. EIIB is now our largest shareholder and we
welcome to the board EIIB`s Head of Private Equity, Mr Robin Henshall. Our
discussions with EIIB have indicated that they are supportive of our immediate
progress, plans and longer-term growth ambitions.
Importantly, the Company is fully-funded as a result of two share placements
(raising GBP3.55 million) and the raising of a project loan of US$5 million
(GBP2.8 million). We are particularly pleased to be able to bring the Lace mine
back into production without further recourse to the stricken and costly
financial markets.
Seeking New Opportunities
We continue to review diamond projects and in particular, those where our
development and operational team can add value. We have talked to many potential
sellers and suitors and, while we are focused in Southern Africa, we have looked
at opportunities as far afield as West Africa, Australia and even Canada.
However, to date we have not been able to match the value and the potential for
profitability that shareholders will gain from Lace. Consequently, after
extensive reviews and due diligence, we have not been able to consummate any
deals. We remain on the look-out as current markets provide impetus for
consolidation and favour those with capital, or access to capital, together with
the particular skill set such as ours that can transform a project into a mine.
I would also remind shareholders that there are other known kimberlites on our
licences around Lace, which we will look to explore when free cashflow is
available.
The Year Ahead
We remain focused for the year ahead - our primary efforts will be to ensure
that we are producing from the underground operation by mid-year, and generating
positive cash flows, with costs contained within the lowest industry quartile.
We anticipate achieving solid margins, even at current diamond prices and when
our operation comes into full production in 2010, we will be able to take full
advantage of the expected recovery in diamond prices.
Our vested value remains unarguable: with some 35 million tonnes of kimberlite
outlined within the Main Pipe, containing an estimated 13.8 million carats of
diamonds at an average grade of 42 carats per hundred tonnes, worth some R10
billion (GBP715 million) in-ground at current prices.
We will maintain our licence to operate, acting as a responsible citizen and
fair employer while we continue to look for attractive opportunities for growth.
Euan Worthington
Chairman
POSTING OF THE ANNUAL REPORT
Shareholders are advised that the Annual Report for the year ended 31
December 2008 will be posted to them on 31 March 2009. An electronic version of
the annual report will be available on the company`s website on or about 31
March 2009.
31 March 2009
London
Sponsor:
Investec Bank Limited
For further information, please contact:
Paul Loudon
DiamondCorp plc
+44 20 7256 2651
Joe Nally/Liz Bowman
Cenkos Securities plc
+44 20 7397 8900
Robert Smith/Tanis Crosby
Investec Bank Limited
+27 11 286 7662
Charmane Russell
Russell & Associates
+27 11 880 3924
Gareth Tredway
Conduit PR
+44 20 7429 6606/+44 7922 923 306
Date: 31/03/2009 08:30:01 Produced by the JSE SENS Department.
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