| Fri 25 Jun 2010, 13:05 | | DMC - DiamondCorp - Final results for the year ended 31 December 2009 |
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DMC
DMC
DMC - DiamondCorp - Final results for the year ended 31 December 2009
DIAMONDCORP
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" or "the Group")
FINAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2009
DiamondCorp plc, the African diamond mining and exploration company, releases
its audited results for year ended 31 December 2009.
HIGHLIGHTS
- Cessation of surface mining activities at our Lace mine in South Africa due
to the fall in diamond prices;
- Management focus on funding and completing underground mine development at
Lace;
- Completion of feasibility study on the Lace kimberlite in September 2009
which concluded a life of mine in excess of 25 years at Lace, with the
potential of producing more than 400,000 carats of diamonds per annum at
peak production in 2016;
- Completion of an upgraded resource statement by VP3 Geoservices (Pty)
Limited outlining 33 million tonnes of kimberlite at an average grade of 40
carats per hundred tonnes ("cpht"), containing more than 13 million carats
in resources, worth some US$1.5 billion at current prices;
- The granting by the Department of Mineral Resources of a mining right over
the Lace mine, providing all the required permits for a long-life
underground mining operation;
- The discovery in the Pretoria archives of records of workings at the Lace
mine between 1900 and 1931 which showed that more than 10,000m of
development drives are already in place between the 240m level and the 340m
level, thereby confirming the Company`s strategy to access the kimberlite
at -240m by a new 4.5m x 4.5m decline;
- Utilisation of cash resources to meet loan obligations, long term debt at
year end GBP2.2m;
- Signing of a joint venture with a local company in Botswana over three
diamond exploration licences;
- Initial drilling of the J-01 kimberlite in the joint venture area in
Botswana intersected a 10ha diamondiferous kimberlite to a depth of 330m.
At least two more kimberlites will be drilled in 2010; and
- In November 2009 we raised GBP600,000 to complete exploration obligations
in Botswana and to meet short-term working capital requirements.
POST PERIOD HIGHLIGHTS
- Subsequent to the year end the Company raised a further GBP7.1 million to
complete the decline development at Lace to the 240 metre level and
continue with further exploration in Botswana, to fund 2010 debt
obligations and working capital requirements.
The annual report and accounts will be posted to shareholders on 30 June 2010
and made available on the company`s website www.diamondcorp.plc.uk
The Notice of AGM will be posted in July.
AIM Nomad: Cenkos Securities plc
AIM Brokers: Cenkos Securities plc, Fairfax I.S. plc
JSE Sponsor: PSG Capital (Pty) Limited
DiamondCorp plc, Paul Loudon +44 20 7256 2651
Liz Bowman/Ivonne Cantu, Cenkos Securities plc +44 20 7397 8900
Ewan Leggat, Fairfax I.S. plc +44 207 598 5368
John-Paul Dicks, PSG Capital (Pty) Limited +27 21 887 9602
Charmane Russell/Marion Brower, Russell & Associates +27 11 880 3924
LETTER FROM THE CHAIRMAN AND CHIEF EXECUTIVE OFFICER
Dear Shareholders,
Although the 2009 financial year is one which we would all rather forget,
dominated as it was by the cessation of surface mining activities at our Lace
mine in South Africa, we have emerged from the global financial collapse in
better shape than we would have expected only a year ago when we had started
underground mine development.
After we stopped producing diamonds from the old mine tailings, due to the
collapse in diamond prices, we focused on putting into place a number of steps
to ease the transition into a fully functioning underground mining operation.
These include the following developments:
- The granting by the Department of Mineral Resources of a mining right
over the Lace mine, providing all the required permits for a long-life
underground mining operation;
- The fortuitous discovery in the Pretoria archives of records of workings
at the Lace mine between 1900 and 1931 which indicates the extensive
mining that took place above the 240m level, leaving only remnant
pillars. However, more importantly they show that more than 10,000m of
development drives are already in place between the 240m level and the
340m level, thereby confirming our strategy to access the kimberlite at
this level by a new 4.5m x 4.5m decline;
- Using available cash resources to reduce long term debt - by the end of
2010 we will have paid down US$1.5 million of US$5 million raised with
Africa Opportunity Fund LP;
- Completion of feasibility study on the Lace kimberlite in September 2009
which concluded a life of mine in excess of 25 years at Lace, with the
potential of producing more than 400,000 carats of diamonds per annum at
peak production in 2016;
- Completion of an upgraded resource statement by VP3 Geoservices (Pty)
Limited outlining 33 million tonnes of kimberlite at an average grade of
40 carats per hundred tonnes ("cpht"), containing more than 13 million
carats in resources, worth some US$1.5 billion at current prices;
- Signing of a joint venture with a local company in Botswana over three
diamond exploration licences covering an area of 109.2 km2 near the
Jwaneng Mine - with nine identified kimberlite targets, represents
significant blue sky opportunity. DiamondCorp will earn a 77.5% interest
in this joint venture, by completing a definitive feasibility study on at
least one of the kimberlites over a period of five years;
- Initial drilling of the J-01 kimberlite in the joint venture area
intersected a 9.9ha diamondiferous kimberlite to a depth of 330m. At
least two more kimberlites will be drilled in 2010; and
- In November 2009 we raised GBP600,000 to complete exploration obligations
in Botswana and to meet short-term working capital requirements.
Subsequent to the year end we raised a further GBP7.1 million to complete
the decline development at Lace to the 240 metre level and continue with
further exploration in Botswana to fund 2010 debt obligations and working
capital requirements.
The Lace mine
The interruption of the tailings retreatment operations at Lace was something
we would have liked to avoid. The tailings operation provided useful
information about the quality of the Lace diamonds and about the functionality
of the Lace plant. Nonetheless, we remain upbeat about the future
sustainability of Lace, and are confident that it will continue to yield real
value, especially as we have now seen a recovery in diamond prices and believe
in strong market fundamentals going forward. Key to our future success at
Lace is the development of a decline in order to take a 30,000 tonne bulk
sample from the 240m level. Snowden Mining Industry Consultants ("Snowden"),
our independent mining engineering consultants, has designed and is overseeing
the development of the decline and the subsequent sub-level caving mine plan.
Once the grade has been confirmed, mining activities, planned to go down to
850m below surface, will start. Approximately 33 million tonnes of kimberlite
have been outlined in the main Lace pipe between the 240 and 850m levels, at a
grade of 40 cpht. We plan to use sub-level caving at Lace, incorporating
10,000m of development drives already in place between the 240 and 330m
levels. While the existing vertical shaft is being refurbished, material will
initially be hauled to surface up the decline at a rate of about 12,000 tonnes
per month.
Activities at Lace during 2010 will concentrate on completing the decline.
Then in 2011, the 30,000 tonne bulk sample will be extracted for determination
of grade at the initial mining level. We will then need to raise additional
capital to establish full-scale production from underground at a rate of 1.2
million tonnes per annum during 2011 and to finance further debt repayments
and other working capital requirements.
New opportunities
In last year`s annual report, we noted how we were seeking opportunities to
grow DiamondCorp from a single asset company. The search for attractive
targets continued last year and we were very pleased to be able to sign, in
June last year, a joint venture over known kimberlite pipes in Botswana, a
country which is the world`s leading diamond producer, is politically stable
and has an attractive fiscal regime.
We now have both a near term mine at Lace and outstanding, advanced
exploration targets near Jwaneng, . We will continue to use our skill base to
evaluate opportunities in the diamond sector. However, we can assure you that
our sights remain high and any acquisition must be able to bring financial
gains to our shareholders.
Botswana Exploration Joint Venture
Our main exploration project in Botswana is PL/71, a prospect immediately
southeast of the De Beers Jwaneng mine, the richest diamond mine in the world.
The prospect comprises five geophysical targets, three of them being priority
targets for geophysical survey and drill testing. In November 2009 we
completed two diamond boreholes at one of the targets J-01. Both of these
holes intersected kimberlite at some 20m down hole depth to the end of the
boreholes, indicating the presence of a 10 hectare kimberlite body.
Encouragingly for any future mine development, the sand cover in the Jwaneng
area is only 20m. Our analysis of 350kg of samples has indicated that the J-
01 kimberlite is diamondiferous. Large diameter drilling will now need to be
completed in order to recover a large enough sample of kimberlite for grade
estimation.
Ground gravity and magnetic surveys have been completed over the two other
priority targets J-05 and J12, indicating one of these kimberlites to be up to
4 hectares (ha) in size, the other, although still not entirely conclusive,
could be between 5 and 15ha in size. We are currently re-processing the
geophysical data to better define the target ahead of a programme of initial
diamond drill holes, the results of which will allow us to plan future large
diameter drilling and mini bulk testing priorities.
Funding for the future
In November 2009 the company raised GBP600,000 by way of a placement of
shares. The funds were applied mainly to complete exploration obligations in
Botswana, make an interest payment and cover costs at Lace. In 2009 rough
diamond prices started recovering and since then investor and market sentiment
has changed completely. We were then able to raise a further GBP7.1 million
subsequent to the year end, through a placement and subscription, to fund the
continued development of the company ,which we will allocate as follows:
- GBP4.0 million to implement the decline development and complete the
sub- level caving plan to resume underground mining at Lace - between
240m and 330m levels. We plan to access the Lace kimberlite at the
240m level via the decline in the first half of 2011. At that time it
is expected that a kimberlite mining sample of approx 30,000 tonnes
will be extracted and processed through the Lace plant in order to
determined a definitive diamond grade at the mining level;
- GBP0.5 million - to fund further drilling in Botswana. Our right to
earn in a 77.5% joint venture interest will rely on funding
exploration activities and completing a definitive feasibility study
by May 2014; and
- GBP2.6 million for financing costs, working capital and for debt
payments - the company currently has a US$4.5 million loan facility
with the Africa Opportunity Fund LP, secured against the South
African assets. Some GBP0.9 million will be used to meet principal
and interest payments on this loan during the remainder of 2010.
In conclusion
After such a difficult year we wish to thank all of our staff and consultants
who have persevered during extremely difficult times. We are also delighted to
welcome Keith McCulloch who has recently joined our team as general manager at
Lace. Keith`s vast experience in both underground and surface mining throughout
Southern Africa stands us in good stead as we resume development at Lace and
start to turn to account the very attractive potential 13 million carats in
resource. With this development schedule in place we should be well placed to
deliver into a forecast rising diamond price environment
in 2011. At the same time, we hope for exciting results
from our exploration programme in Botswana.
Euan Worthington, Chairman
Paul Loudon, CEO
CONSOLIDATED INCOME STATEMENT
Year ended 31 December 2009
2009 2008
Consolidated income statement Note GBP GBP
Revenue 68,863 916,767
Cost of sales (68,863) (1,494,253)
GROSS LOSS - (577,486)
Administrative expenses (2,456,448) (3,027,623)
Other costs
Impairment of intangible asset (1,648,467) -
OPERATING LOSS 3 (4,104,915) (3,605,109)
Investment revenues 35,736 32,043
Finance costs (80,177) (682,286)
LOSS BEFORE TAX (4,149,356) (4,255,352)
Tax 6 (57,723) (30,132)
LOSS FOR THE FINANCIAL YEAR 18 (4,207,079) (4,285,484)
ATTRIBUTABLE TO THE EQUITY HOLDERS
OF THE
PARENT (4,207,079) (4,285,484)
BASIC AND DILUTED LOSS PER SHARE 7 (10.01p) (11.65p)
HEADLINE LOSS PER SHARE 7 (6.15p) (11.55p)
All of the activities of the Group are classed as continuing.
CONSOLIDATED BALANCE SHEET
Year ended 31 December 2009
2009 2008
Consolidated balance sheet Note GBP GBP
NON-CURRENT ASSETS
Goodwill 8 4,606,026 4,606,026
Other intangible assets 8 2,523,303 2,311,232
Property, plant and equipment 9 6,412,997 5,644,476
Deferred tax asset 15 - 57,723
13,542,326 12,619,457
CURRENT ASSETS
Inventories 11 303,020 463,822
Other receivables 12 190,703 566,730
Cash and cash equivalents 288,188 3,252,276
781,911 4,282,828
TOTAL ASSETS 14,324,237 16,902,285
CURRENT LIABILITIES
Obligations under finance
leases (73,345) (91,269)
Other payables 13 (691,829) (667,375)
Current portion of long term
loan 14 (941,738) -
Provisions (11,791) (9,241)
(1,718,703) (767,885)
NON-CURRENT LIABILITIES
Long term loan 14 (2,163,009) (3,399,709)
NET ASSETS 10,442,525 12,734,691
EQUITY
Share capital 17 1,416,960 1,232,610
Share premium account 18 17,872,580 17,460,220
Warrant reserve 18 555,036 710,514
Share option reserve 18 371,675 320,261
Translation reserve 18 1,495,317 209,339
Retained losses 18 (11,269,043) (7,198,253)
TOTAL EQUITY 10,442,525 12,734,691
STATEMENT OF CHANGES IN EQUITY
Year ended 31 December 2009
2009 2008
GBP GBP
Statement of changes in equity
Opening balance 12,734,691 13,264,924
Loss for financial year (4,207,079) (4,285,484)
New equity share capital subscribed 184,350 189,498
Premium on new equity share capital subscribed 412,,360 3,343,914
Value attributed to warrants granted (19,189) 57,566
Value attributed to share options granted 51,414 37,471
Translation reserve 1,285,978 126,802
Closing balance 10,442,525 12,734,691
CONSOLIDATED CASH FLOW STATEMENT
Year ended 31 December 2009
2009 2008
Consolidated cash flow statement GBP GBP
Operating loss (4,104,915) (3,605,109)
Depreciation and amortisation 1,027,643 645,860
Share based payment charge 51,414 37,471
Other gains and losses - 3,998
(Gain)/loss on disposal of property plant and
equipment (26,436) 39,642
Impairment of intangible asset 1,648,467 -
Finance costs - (7,913)
Decrease /(increase) in receivables 376,027 (430,235)
Decrease in inventories 160,802 522,227
Increase in payables 27,004 569,276
Effect of foreign exchange translation 64,547 (85,894)
Other non cash movements 44,121 -
NET CASH USED IN OPERATING ACTIVITIES (731,326) (2,310,677)
INVESTING ACTIVITIES
Purchase of intangible assets (1,631,961) (883,365)
Purchase of property, plant and equipment (1,281,117) (1,334,611)
Investment revenues 35,736 32,043
NET CASH USED IN INVESTING ACTIVITIES (2,877,342) (2,185,933)
FINANCING ACTIVITIES
New long term loan raised - 2,846,246
Repayment of borrowings (393,683) -
Proceeds on issue of ordinary shares 596,710 3,533,412
NET CASH FROM FINANCING ACTIVITIES 203,027 6,379,658
NET (DECREASE) /INCREASE IN CASH AND CASH
EQUIVALENTS (3,405,641) 1,883,048
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 3,252,276 1,330,707
Effect of foreign exchange rate changes 441,553 38,521
CASH AND CASH EQUIVALENTS AT END OF YEAR 288,188 3,252,276
AUDIT OPINION
The auditors, Deloitte LLP, have audited the financial statements for the year
ended 31 December 2009. A copy of their unqualified audit report will be sent
to shareholders with the report and accounts and will be made available for
inspection at the Company`s registered office.
NOTES TO THE FINANCIAL STATEMENTS
1. BASIS OF PREPARATION AND ACCOUNTING POLICIES
General information
DiamondCorp plc is a Company incorporated in England and Wales under the
Companies Act 2006 and as an external company in South Africa under the
Companies Act No 61 of 1973. The address of the registered office is given on
page 1. The nature of the Group`s operations and its principal activities are
set out in the Directors` Report on page 7.
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
In the current year, the following new and revised Standards and
Interpretations have been adopted and have affected the amounts reported in
these financial statements.
Standards affecting presentation and disclosure
IAS 1 (revised 2007) Presentation of IAS 1 (2007) has introduced a number of
Financial Statements changes in the format and content of
the financial statements. In addition,
the reviewed Standard has required the
presentation of a consolidated
statement of comprehensive income.
IFRS 8 Operating Segments IFRS 8 is a disclosure Standard that
has not resulted in any changes
to the amounts reported (see note 2)
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.
At the date of authorisation of these financial statements, the following
Standards and Interpretations which have not been applied in these financial
statements were in issue but not yet effective:
Amendments to IFRS 2 Vesting conditions and cancellations
IFRS 3 (revised) Business Combinations
IFRS 9 Financial Instruments
IFRIC 17 Distributions of Non-cash Assets to Owners
IFRIC 18 Transfers of Assets from Customers
IFRIC 19 Extinguishing Financial Liabilities with Equity
Instruments
IAS 23 (revised) Borrowing Costs
Amendments to IAS 27 Consolidated and Separate Financial Statements
IAS 32 (amended)/IAS 1 (amended) Puttable Financial Instruments and Obligations
Arising on Liquidation
Amendments to IAS 39 Financial Instruments: Recognition and
Measurement: Eligible Hedged Items
Amendments to IAS 39 Reclassification of Financial Assets: Effective
Date and Transition
The Directors anticipate that the adoption of these Standards and
Interpretations in future periods will have no material impact on the financial
statements of the Group.
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 issued by
the International Accounting Board (IASB). There are no differences for the
Group in applying IFRS as adopted by the European Union and therefore the Group
financial statements comply with Article 4 of the EU IAS Regulation. The
financial statements have been prepared on a going concern basis. The principal
accounting policies adopted are set out below.
c) Basis of consolidation
The consolidated financial statements incorporate the financial statements of
the Company and entities controlled by the Company (its subsidiaries). Control
is achieved where the Company has the power to govern the financial and
operating policies of an investee entity so as to obtain benefits from its
activities.
Minority interests in the net assets of consolidated subsidiaries are
identified separately from the Group`s equity therein. Minority interests
consist of the amount of those interests at the date of the original business
combination (see below) and the minority`s share of changes in equity since the
date of the combination.
Losses applicable to the minority in excess of the minority`s interest in the
subsidiary`s equity are allocated against the interests of the Group except to
the extent that the minority has a binding obligation and is able to make an
additional investment to cover the losses.
The results of subsidiaries acquired or disposed of during the year are
included in the consolidated income statement from the effective date of
acquisition or up to the effective date of disposal, as appropriate.
Where necessary, adjustments are made to the financial statements of
subsidiaries to bring the accounting policies used into line with those used by
the Group.
All intra-Group transactions, balances, income and expenses are eliminated on
consolidation.
d) Going Concern
In determining the appropriate basis of presentation of the financial
statements, the Directors are required to consider whether the Group can
continue in operational existence for the foreseeable future, this being a
period of not less than 12 months from the date of the approval of the
financial statements. The Group`s business activities and goals are set out in
the Letter from the Chairman and Chief Executive. During the next 12 months the
Group will be in a mine-development phase and forecasts indicate that the Group
may have insufficient financial resources to accomplish all its development
goals and meet all its financial obligations over the next 12 months. The
raising of additional finance is deemed to be a material uncertainty which
casts significant doubt over the ability of the Group to continue as a going
concern.
If its financial resources were insufficient, then the Group would be required
to (i) supplement its current cash resources by accessing the equity markets in
2010-2011 or by sale of assets or, alternatively, (ii) to modify its
development plan to preserve cash.
After making enquiries, given the recent successful GBP7.1 million fundraising
which was well-supported by the existing shareholder base, assuming that the
Group adheres to its development plan, the Directors have a reasonable
expectation that additional funds will be available within the next 12 months.
Accordingly the Directors continue to adopt the going concern basis of
presentation of the financial statements.
The financial statements therefore do not include the adjustments that would
result if the Group were not able to continue as a going concern
e) Business combinations
The acquisition of subsidiaries is accounted for using the purchase method. The
cost of the acquisition is measured at the aggregate of the fair values, at the
date of exchange, of assets given, liabilities incurred or assumed, and equity
instruments issued by the Group in exchange for control of the acquiree, plus
any costs directly attributable to the business combination. The acquiree`s
identifiable assets, liabilities and contingent liabilities that meet the
conditions for recognition under IFRS 3 "Business Combination" are recognised
at their fair value at the acquisition date, except for non-current assets (or
disposal Groups) that are classified as held for resale in accordance with IFRS
5 "Non-Current Assets held for Sale and Discontinued Operations" which are not
recognised and measured at fair value less costs to sell.
Goodwill arising on acquisition is recognised as an asset and initially
measured at cost, being the excess of the cost of the business combination over
the Group`s interest in the net fair value of the identifiable assets,
liabilities and contingent liabilities recognised. If, after reassessment, the
Group`s interest in the net fair value of the acquiree`s identifiable assets,
liabilities and contingent liabilities exceeds the cost of the business
combination, the excess is recognised immediately in profit or loss.
The interest of minority shareholders in the acquiree is initially measured at
the minority`s proportion of the net fair value of the assets, liabilities and
contingent liabilities recognised.
e) Goodwill
Goodwill arising on consolidation represents the excess of the cost of
acquisition over the Group`s interest in the fair value of the identifiable
assets and liabilities of a subsidiary, at the date of acquisition. Goodwill is
initially recognised as an asset at cost and is subsequently measured at cost
less any accumulated impairment losses. Goodwill which is recognised as an
asset is reviewed for impairment at least annually. Any impairment is
recognised immediately in profit or loss and is not subsequently reversed.
For the purpose of impairment testing, goodwill is allocated to the Group`s
cash-generating unit expected to benefit from the synergies of the combination.
The cash-generating unit to which goodwill has been allocated is tested for
impairment annually, or more frequently when there is an indication that the
unit may be impaired. If the recoverable amount of the cash-generating unit is
less than the carrying amount of the unit, the impairment loss is allocated
first to reduce the carrying amount of any goodwill allocated to the unit and
then to the other assets of the unit pro-rata on the basis of the carrying
amount of each asset in the unit.
On disposal of a subsidiary, the attributable amount of goodwill is included in
the determination of the profit or loss on disposal.
g) Intangible assets
Exploration and evaluation expenditure comprises costs which are directly
attributable to the acquisition of exploration licenses and subsequent
exploration expenditures.
(i) Such costs are expected to be recouped in full through
successful development and exploration of the area of interest
or alternatively, by its sale;
(ii) Exploration and evaluation activities in the area of interest
have reached a stage which permits a reasonable assessment of
the existence of economically recoverable reserves with active
and significant operations in relation to the area continuing,
or planned for the future.
Identifiable exploration and evaluation assets acquired are recognised as
assets at their cost of acquisition. An impairment review is performed when
facts and circumstances suggest that the carrying amount of the assets may
exceed their recoverable amounts. Exploration assets are reassessed on a
regular basis and these costs are carried forward provided that at least one of
the conditions outlined is met. Exploration rights are amortised over the
useful economic life of the mine to which it relates, commencing when the asset
is available for use.
Expenditure on research activities is recognised as an expense in the period in
which it is incurred.
Capitalised pre-production expenditure includes costs incurred and capitalised
during the plant construction phase which are intangible in nature. In prior
years these capitalised expenditures were amortised over the life of the work
in progress. However, the Mining Right has been granted and for 2008 and
subsequent years these expenditures will be amortised at a rate of 5% based on
the life of the Mining Right.
Rights to use the Power Line are capitalised at their cost of acquisition and
are being amortised over the useful economic life at a rate of 5% per annum.
Underground exploration and evaluation expenditure will be amortised from the
point at which it is available for use over its useful economic life, expected
to be 5% per annum.
h) Property, plant and equipment
Property, plant and equipment is stated at cost less any subsequent accumulated
depreciation and subsequent accumulated impairment losses.
Depreciation is charged so as to write off the cost, less estimated residual
value on assets other than land, over their estimated useful lives, using the
reducing balance method, on the following bases:
Plant 5%
Mining fleet 25%
Buildings 4%
Other tangible assets 20 - 33.33%
The gain or loss arising on the disposal or retirement of an asset is
determined as the difference between the sales proceeds and the carrying amount
of the asset and is recognised in income.
i) Impairment of tangible and intangible assets excluding goodwill
At each balance sheet date, the Group reviews the carrying amounts of its
tangible and intangible assets to determine whether there is any indication
that those assets have suffered an impairment loss. If any such indication
exists, the recoverable amount of the asset is estimated in order to determine
the extent of the impairment loss (if any). Where the asset does not generate
cash flows that are independent from other assets, the Group estimates the
recoverable amount of the cash-generating unit to which the asset belongs.
Recoverable amount is the higher of fair value less costs to sell and value in
use. In assessing value in use, the estimated future cash flows are discounted
to the present value using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset for
which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to
be less than its carrying amount, the carrying amount of the asset
(cash-generating unit) is reduced to its recoverable amount. An impairment loss
is recognised as an expense immediately, unless the relevant asset is carried
at a re-valued amount, in which case the impairment loss is treated as a
revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of the
asset (cash-generating unit) is increased to the revised estimate of its
recoverable amount, but so that the increased carrying amount does not exceed
the carrying amount that would have been determined had no impairment loss been
recognised for the asset (cash-generating unit) in prior years. A reversal of
an impairment loss is recognised as income immediately, unless the relevant
asset is carried at a re-valued amount, in which case the reversal of the
impairment loss is treated as a revaluation increase.
j) Taxation
The tax expense represents the sum of the tax currently payable and deferred
tax.
The tax currently payable is based on taxable losses for the period. Taxable
loss differs from net loss as reported in the income statement because it
excludes items of income or expense that are taxable or deductible in other
years and it further excludes items that are never taxable or deductible. The
Group`s liability for current tax is calculated using tax rates that have been
enacted or substantively enacted by the balance sheet date.
Deferred tax is the tax expected to be payable or recoverable on differences
between the carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation of taxable
profit, and is accounted for using the balance sheet liability method. Deferred
tax liabilities are generally recognised for all taxable temporary differences
and deferred tax assets are recognised to the extent that it is probable that
taxable profits will be available against which deductible temporary
differences can be utilised. Such assets and liabilities are not recognised if
the temporary differences arise from the initial recognition of goodwill or
from the initial recognition (other than in a business combination) of other
assets and liabilities in a transaction that affects neither the tax profit nor
the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences
arising on investments in subsidiaries and associates, and interests in joint
ventures, except where the Group is able to control the reversal of the
temporary difference and it is probable that the temporary difference will not
reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each balance sheet
date and reduced to the extent that it is no longer probable that sufficient
taxable profits will be available to allow all or part of the asset to be
recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the
period when the liability is settled or the asset is realised. Deferred tax is
charged or credited in the income statement, except when it relates to items
charged or credited directly to equity, in which case the deferred tax is also
dealt with in equity.
Deferred tax assets and liabilities are offset when there is a legally
enforceable right to set off current tax assets against current tax liabilities
and when they relate to income taxes levied by the same taxation authority and
the Group intends to settle its current tax assets and liabilities on a net
basis.
k) Financial instruments
Financial assets and financial liabilities are recognised on the Group`s
balance sheet when the Group becomes a party to the contractual provisions of
the instrument.
Trade receivables
Trade receivables are measured at initial recognition at fair value, and are
subsequently measured at amortised cost using the effective interest rate
method. Appropriate allowances for estimated irrecoverable amounts are
recognised in the income statement when there is objective evidence that the
asset is impaired. The allowance recognised is measured as the difference
between the asset`s carrying amount and the present value of estimated future
cash flows discounted at the effective interest rate computed at initial
recognition.
Cash and cash equivalents
Cash and cash equivalents comprises cash in hand and demand deposits, and other
short-term highly liquid investments that are readily convertible to a known
amount of cash and are subject to an insignificant risk of changes in value.
Financial liabilities and equity
Financial liabilities and equity instruments are classified according to the
substance of the contractual arrangements entered into. An equity instrument is
any contract that evidences a residual interest in the assets of the Group
after deducting all of its liabilities.
Trade payables
Trade payables are initially measured at fair value, and are subsequently
measured at amortised cost, using the effective interest rate method.
The effective interest method is a method of calculating the amortised cost of
a financial asset and of allocating interest income over the relevant period.
The effective interest rate is the rate that exactly discounts estimated future
cash receipts (including all fees on points paid or received that form an
integral part of the effective interest rate, transaction costs and other
premiums or discounts) through the expected life of the financial asset, or,
where appropriate, a shorter period.
Equity instruments
Equity instruments issued by the Company are recorded at the proceeds received,
net of direct issue costs.
Intercompany receivables
Intercompany receivables are initially recognised by the Company at fair value
and are subsequently measured at amortised cost using the effective interest
rate method.
l) Foreign currencies
The individual financial statements of each Group Company are presented in the
currency of the primary economic environment in which it operates (its
functional currency). For the purpose of the consolidated financial statements,
the results and financial position of each Group Company are expressed in
pounds sterling, which is the functional currency of the Company, and the
presentation currency for the consolidated financial statements.
In preparing the financial statements of the individual entities, transactions
in currencies other than the entity`s functional currency (foreign currencies)
are recorded at the rates of exchange prevailing on the dates of the
transactions. At each balance sheet date, monetary assets and liabilities that
are denominated in foreign currencies are retranslated at the rates prevailing
on the balance sheet date. Non-monetary items carried at fair value that are
denominated in foreign currencies are retranslated at the rates prevailing on
the date when the fair value was determined. Non-monetary items that are
measured in terms of historical cost in a foreign currency are not translated.
Exchange differences arising on the settlement of monetary items, and on the
retranslation of monetary items, are included in the income statement for the
period. In the case of intercompany loans, any foreign exchange differences
arising on elimination of these loans upon consolidation of the Group
Companies, are classified as equity and transferred to the Group`s translation
reserve, as these loans are for investment purposes even though short term in
nature. Exchange differences arising on the retranslation of non-monetary items
carried at fair value are included in the income statement for the period
except for differences arising on the retranslation of non-monetary items in
respect of which gains and losses are recognised directly in equity. For such
non- monetary items, any exchange component of that gain or loss is also
recognised directly in equity.
For the purpose of presenting consolidated financial statements, the assets and
liabilities of the Group`s foreign operations are translated at exchange rates
prevailing on the balance sheet date. Income and expense items are translated
at the average exchange rates for the period, unless exchange rates fluctuated
significantly during that period, in which case the exchange rates at the dates
of the transactions are used. Exchange differences arising, if any, are
classified as other comprehensive income and transferred to the Group`s
translation reserve. Such translation differences are recognised in the income
statement in the period in which the foreign operation is disposed of.
Goodwill and fair value adjustments arising on the acquisition of a foreign
entity are treated as assets and liabilities of the foreign entity and
translated at the closing rate.
m) Restoration, rehabilitation and environmental costs
An obligation to incur restoration, rehabilitation and environmental costs
arises when environmental disturbance is caused by the development or ongoing
production of a mining property. Such costs arising from the installation of
plant and other site preparation work, discounted to their net present value,
are provided for and capitalised at the start of each project, as soon as the
obligation to incur such costs arises.
These costs are charged against profits over the life of the operation, through
the depreciation of the asset and the unwinding of the discount on the
provision. Costs for restoration of subsequent site damage which is created on
an ongoing basis during production are provided for at their net present values
and charged against profits as extraction progresses.
Changes in the measurement of a liability relating to the decommissioning of
plant or other site preparation work that result from changes in the estimated
timing or amount of the cash flow, or a change in the discount rate, are added
to, or deducted from, the cost of the related asset in the current period. If a
decrease in the liability exceeds the carrying amount of the asset, the excess
is recognised immediately in the income statement. If the asset value is
increased and there is an indication that the revised carrying value is not
recoverable, an impairment test is performed in accordance with the accounting
policy above.
n) Inventories
Inventory and work in progress are valued at the lower of cost and net
realisable value.
Work in progress was valued at the time of acquisition at GBP2.84 per carat
based on an in situ valuation equivalent to 8% of the market value of US$63 per
carat achieved at a sale of Lace project diamonds in May 2005. The number of
carats in inventory (370,285 carats) was based on an expert determination
provided to the Company by a qualified external valuer. Work in progress is
being amortized on the units of production method.
o) Revenue
Revenue from the sale of diamonds is recorded when the diamonds are sold at
tender. The Lace plant was commissioned on 1 October 2007. The proceeds from
the sale of diamonds recovered prior to that date were recorded as a reduction
in the carrying value of the pre-production expenses held within intangible
assets.
Revenue earned from pre-commissioning sales was recognised against, property,
plant and equipment in the period incurred. Revenue is measured at the fair
value of the consideration received or receivable.
Interest income is accrued on a time basis, by reference to the principal
outstanding and at the effective interest rate applicable, which is the rate
that exactly discounts estimated future cash receipts through the expected life
of the financial asset to that asset`s net carrying value.
p) Finance leases
Leases are classified as finance leases whenever the terms of the lease
transfer substantially all the risks and rewards of ownership to the lessee.
All other leases are classified as operating leases. Rentals payable under
operating leases are charged to income on a straight-line basis over the term
of the relevant lease.
Assets held under finance leases are initially recognised as assets of the
Group at their fair value at the inception of the lease or, if lower, at the
present value of the minimum lease payments. The corresponding liability to the
lessor is included in the balance sheet as a finance lease obligation.
r) Critical accounting judgements
In the process of applying the Group`s accounting policies, which are described
above, the Directors have made the following judgements that have the most
significant effect on the amounts recognised in the financial information.
- Valuation of inventory - see accounting policy n) above.
- Valuation of warrants issued and ordinary shares issued as consideration -
see notes 18 and 19.
- Impairment of goodwill and other intangible assets - see policy f) and g)
above.
- Going concern - see page 25.
2. BUSINESS AND GEOGRAPHICAL SEGMENTS
For management purposes, the Group has one business and geographical segment -
diamond mining and exploration in the Republic of South Africa. The Group is
also exploring for diamonds in Botswana but at 31 December 2009 the investment
was not material to this footnote.
3. OPERATING LOSS
Group Group Company Company
2009 2008 2009 2008
GBP GBP GBP GBP
Operating loss is after
charging (crediting):
Auditors` remuneration 67,000 85,800 34,000 44,000
Foreign exchange (gains)
losses (249,604) 85,894 (248,260) 85,753
(Profit) loss on disposal
of fixed assets (26,436) 39,642 - -
Depreciation of tangible
assets 960,692 547,042 - -
Amortisation of intangible
assets 79,885 98,818 19.817 19,817
Amortisation of work in
progress - 67,331 - -
Impairment of intangible
assets 1,648,467 - - -
Impairment of inventories 98,059 377,534 - -
The analysis of auditors`
remuneration is as follows:
Fees payable to the
Company`s auditors for the
audit
of Company`s accounts 34,000 34,000 34,000 34,000
Fees payable to the
Company`s auditors and
their
associates for other
services to the Group - - - -
The audit of the Company`s
subsidiaries 33,000 31,800 - -
Total audit fees 67,000 65,800 34,000 34,000
Corporate finance services - 20,000 - 10,000
Total non-audit fees - 20,000 - 10,000
TOTAL 67,000 85,800 34,000 44,000
The corporate finance services in 2008 were in relation to the group`s listing
on JSE.
4. STAFF COSTS
Staff costs of the Group and Company were:
2009 2008
Group GBP GBP
Wages and salaries 566,772 661,452
Social security costs 27,165 39,147
593,937 700,599
Average number of administrative staff 7 9
Average number of operational staff 52 90
Average number of employees 59 99
2009 2008
Company GBP GBP
Wages and salaries 141,000 138,583
Social security costs 18,273 15,672
159,273 154,255
Average number of employees 3 3
5. DIRECTORS` EMOLUMENTS
Directors` emoluments for the year ended 31 December 2009 and 2008 and for the
highest paid director were as follows:
2009 2008
GBP GBP
Directors` remuneration
Fees paid by the Company and its subsidiaries 231,500 213,033
Emoluments of highest paid director 137,500 147,500
6. TAX
2009 2008
GBP GBP
Current tax - 87,855
Deferred tax (see note 15) 57,723 (57,723)
Tax expense for the year 57,723 30,132
The charge for the year can be reconciled to the loss per the income statement
as follows:
2009 2008
GBP GBP
Loss for the year (4,149,356) (4,255,352)
Tax at the UK corporation tax rate of 28% (2008
- 28%) (1,161,820) (1,191,498)
Expenses not deductible 184,165 603,933
Short term timing differences - 364
Tax losses carried forward 977,655 632,673
Prior year adjustment - deferred tax 57,723 (15,340)
Tax expense for the year 57,723 30,132
The tax charge for the year relates to interest earned by Soapstone Investments
(Pty) Limited on an intercompany loan to Lace Diamond Mines (Pty) Limited.
7. 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 42,023,831 (2008 - 36,772,136).
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:
2009 2008
Basic
Loss per share (10.01p) (11.65p)
Effect of (gain)/loss on disposal of property, plant
and equipment (0.06p) 0.10p
Effect of impairment of intangible assets 3.92p -
Adjusted loss per share (6.15) (11.55p)
8. INTANGIBLE FIXED ASSETS
For the year ended 31 December 2009
Group Power line Power line
Goodwill Jwaneng Phase 1 Phase 2
GBP GBP GBP GBP
Cost
At 1 January 2009 4,606,026 - 362,151 137,788
Exchange differences - - 57,934 22,043
Additions - 99,120 - -
At 31 December 2009 4,606,026 99,120 420,085 159,831
Accumulated amortisation
At 1 January 2009 - - (22,878) (4,431)
Charge for the year - - (18,885) (2,433)
Exchange differences - - (5,779) (982)
Impairment charge - - - -
At 31 December 2009 - - (47,542) (7,846)
Carrying amount
At 31 December 2009 4,606,026 99,120 372,543 151,985
At 31 December 2008 4,606,026 - 339,273 133,357
Pre-production Under-ground
Group capitalised capitalised
expenses expenses
GBP GBP
Cost
At 1 January 2009 419,810 899,786
Exchange differences 61,655 138,861
Additions - 1,532,841
At 31 December 2009 481,465 2,571,488
Accumulated amortisation
At 1 January 2009 (42,311) (17,972)
Charge for the year (27,619) -
Exchange differences 3,336 205
Impairment charge - (1,648,467)
At 31 December 2009 (66,594) (1,666,234)
Carrying amount
At 31 December 2009 414,871 905,254
At 31 December 2008 377,499 881,814
Group
Mineral rights Total
GBP GBP
Cost
At 1 January 2009 609,778 7,035,339
Exchange differences 34,144 314,637
Additions - 1,631,961
At 31 December 2009 643,922 8,981,937
Accumulated amortisation
At 1 January 2009 (30,489) (118,081)
Charge for the year (30,948) (79,885)
Exchange differences (2,955) (6,175)
Impairment charge - (1,648,467)
At 31 December 2009 (64,392) (1,852,608)
Carrying amount
At 31 December 2009 579,530 7,129,329
At 31 December 2008 579,289 6,917,258
The impairment charge relates to those costs associated with the section of the
underground tunnelling which no longer has any purpose following the decision
to cease mining operations in the above 240 metre mining level.
For the year ended 31 December 2008
Pre-production
Group Power line Power line capitalised
Goodwill Phase 1 Phase 2 expenses
GBP GBP GBP GBP
Cost
At 1 January
2008 4,606,026 341,221 - 424,792
Exchange
differences - 1,732 13,401 (4,982)
Additions - 19,198 124,387 -
At 31 December
2008 4,606,026 362,151 137,788 419,810
Accumulated
amortisation
At 1 January 2008 - (4,265) - (3,868)
Charge for the
year - (16,806) (4,000) (34,734)
Exchange
differences - (1,807) (431) (3,709)
At 31 December
2008 - (22,878) (4,431) (42,311)
Carrying amount
At 31 December
2008 4,606,026 339,273 133,357 377,499
At 31 December
2007 4,606,026 336,956 - 420,924
Under-ground
Group capitalised
expenses Mineral rights Total
GBP GBP GBP
Cost
At 1 January 2008 80,388 607,299 6,059,726
Exchange differences 79,618 2,479 92,248
Additions 739,780 - 883,365
At 31 December 2008 899,786 609,778 7,035,339
Accumulated amortisation
At 1 January 2008 - - (8,133)
Charge for the year (13,827) (29,451) (98,818)
Exchange differences (4,145) (1,038) (11,130)
At 31 December 2008 (17,972) (30,489) (118,081)
Carrying amount
At 31 December 2008 881,814 579,289 6,917,258
At 31 December 2007 80,388 607,299 6,051,593
For the year ended 31 December 2009
Company Mineral
rights
GBP
Cost and carrying amount
At 1 January 2009 376,526
Charge for the year (19,817)
At 31 December 2009 356,709
For the year ended 31 December 2008
Company Mineral
rights
GBP
Cost and carrying amount
At 1 January 2008 396,343
Charge for the year (19,817)
At 31 December 2008 376,526
The Group has received its Mining Right for the Lace project. Accordingly, the
amortisation policy for pre- production capitalised expenses was changed
effective 1 January 2008 to 5% to conform with the life of the plant for
amortisation purposes.
The Group has been granted "New Order Prospecting Rights" in respect of two
properties in the Free State of the Republic of South Africa:
(i) Ruby 691 Farm, which covers an area of 1,180.6 hectares and in which is
situated the historical workings of the Lace diamond mine; and
(ii) Silverbank Farm, which covers an area of 4,407.6 hectares.
In addition, the Group purchased the surface rights to Subdivision 1 of Ruby
691 Farm which is 108.2 hectares in area.
The Group tests annually for impairment, or more frequently if there are
indications that goodwill might be impaired.
The Group has one reportable business segment and all goodwill is associated
with that segment. The recoverable amounts of the cash generating unit ("CGU")
is determined from value in use calculations. The key assumptions for the value
in use calculations are those regarding the discount rates, growth rates and
expected changes to selling prices and direct costs during the period. A
discount rate of 10% has been used, which is consistent with the rate used for
determining the value of purchased intangibles.
The Group`s test for impairment is based on a model adopted by management from
the model prepared for the Lace Mine by one of its technical advisors This
model uses grade assumptions based on the resource statement of the Group`s
technical advisor and it uses diamond prices achieved at its last diamond
tender in 2009. The model assumes that the Lace mine will reach full production
of 1,200,000 tonnes of kimberlite in 2012 and run through 2034. The valuations
of the Lace Mine generated by the Model under variable sets of assumptions as
to grades, revenues and costs indicate that there has been no impairment of
goodwill during the year.
9. PROPERTY, PLANT AND EQUIPMENT
For the year ended 31 December 2009
Group Land
Mining and
Plant fleet buildings
GBP GBP GBP
Cost
At 1 January 2009 4,402,552 1,737,553 205,561
Additions 352,924 833,051 8,965
Exchange differences 743,893 309,593 33,890
Disposals - (551,143) -
At 31 December 2009 5,499,369 2,329,054 248,416
Accumulated depreciation
At 1 January 2009 (287,926) (517,890) (25,368)
Charge for the year (373,707) (539,448) (14,191)
Disposals - 136,949 -
Exchange differences (103,069) (143,089) (5,651)
At 31 December 2009 (764,702) (1,063,478) (45,210)
Carrying amount
At 31 December 2009 4,734,667 1,265,576 203,206
At 31 December 2008 4,114,626 1,219,663 180,193
Group Other
tangible
assets Total
GBP GBP
Cost
At 1 January 2009 200,324 6,545,990
Additions 86,177 1,281,117
Exchange differences 41,715 1,129,091
Disposals - (551,143)
At 31 December 2009 328,216 8,405,055
Accumulated depreciation
At 1 January 2009 (70,330) (901,514)
Charge for the year (33,346) (960,692)
Disposals - 136,949
Exchange differences (14,992) (266,801)
At 31 December 2009 (118,668) (1,992,058)
Carrying amount
At 31 December 2009 209,548 6,412,997
At 31 December 2008 129,994 5,644,476
Group Land
Mining and
Plant fleet buildings
GBP GBP GBP
Cost
At 1 January 2008 3,970,156 1,010,603 133,933
Additions 660,677 675,729 54,667
Exchange differences 48,384 51,221 16,961
Disposals (276,665) - -
At 31 December 2008 4,402,552 1,737,553 205,561
Accumulated depreciation
At 1 January 2008 (48,899) (233,444) (10,598)
Charge for the year (236,574) (259,870) (10,464)
Disposals 20,750 - -
Exchange differences (23,203) (24,576) (4,306)
At 31 December 2008 (287,926) (517,890) (25,368)
Carrying amount
At 31 December 2008 4,114,626 1,219,663 180,193
At 31 December 2007 3,921,257 777,159 123,335
Group Other
tangible
assets Total
GBP GBP
Cost
At 1 January 2008 162,836 5,277,528
Additions 34,807 1,425,880
Exchange differences 2,681 119,247
Disposals - (276,665)
At 31 December 2008 200,324 6,545,990
Accumulated depreciation
At 1 January 2008 (25,898) (318,839)
Charge for the year (40,134) (547,042)
Disposals - 20,750
Exchange differences (4,298) (56,383)
At 31 December 2008 (70,330) (901,514)
Carrying amount
At 31 December 2008 129,994 5,644,476
At 31 December 2007 136,938 4,958,689
10. INVESTMENT IN SUBSIDIARIES
For the year ended 31 December 2009
Company GBP
Cost and carrying amount
At 1 January 2009 and 31 December 2009 4,217,500
For the year ended 31 December 2008
Company GBP
Cost and carrying amount
At 1 January 2008 and 31 December 2008 4,217,500
The investment represents 100% of the share capital of Crown Diamond Mining
Limited ("CDM") which was acquired on 15 May 2006. CDM changed its name to
Diamondcorp Holdings Limited in 2007 ("DHL") and is a Company registered in the
British Virgin Islands.
The Africa Opportunity Fund L.P. loan (Note 14) is secured by the assets of the
subsidiaries. For a list of subsidiaries, please refer to note 21.
11. INVENTORIES
2009 2008
Group GBP GBP
Work in progress
Cost and carrying amount at beginning of year 261,230 754,765
Impairment of inventories - (377,534)
Amortisation - (67,331)
Foreign exchange gain/(loss) 41,790 (48,670)
Carrying amount at end of year 303,020 261,230
Diamond inventories - 126,335
Consumable and other inventories - 76,257
303,020 463,822
At 31 December 2009 diamond inventories amounted to nil (2008 - 17,713) carats.
Work in progress was valued on acquisition at GBP2.84 per carat based on an in
situ valuation equivalent to 8% of the market value of US$63 per carat achieved
at a sale of Lace project diamonds in May 2005.
The number of carats in work in progress (370,285 carats) was based on an
expert determination provided to the Company by a qualified external valuer.
Commissioning of the tailings plant occurred on 1 October 2007. In 2008, the
carrying value of work in progress was written down by GBP377,534 to reflect
depreciation in diamond prices and reduction in grades.
No amortisation was recorded in 2009 (2008 - GBP67,331).
12. OTHER RECEIVABLES
Group Group Company Company
2009 2008 2009 2008
GBP GBP GBP GBP
Receivables due from
Group undertakings - - 14,777,171 13,081,817
Prepayments and other
receivables 190,703 566,730 - 5,885
190,703 566,730 14,777,171 13,087,702
The Directors consider that the carrying amount of these assets approximates
their fair value. All receivables balances are non-interest bearing.
Included in prepayments and other receivables, is a rehabilitation bond held by
the Department of Minerals and Energy in the amount of GBP62,170 (2008 -
GBP62,170) providing for the cost of rehabilitation on termination of the Lace
project.
Credit risk management
The Group and Company`s principal financial assets are bank balances and cash.
The credit risk on liquid funds is limited because the counterparties are banks
with high credit-ratings assigned by international credit-rating agencies. The
Group currently holds no trade receivables. Included within loans and
receivables is an amount of GBPnil (2008 - GBP100,000) which is a contracted
other receivable. This is the amount after an impairment loss recognised in the
year of GBPnil (2008 - GBP170,000).
Management reviews the credit worthiness of all customers before entering into
a transaction.
The Company also holds amounts receivable from related parties as disclosed in
note 16. Management reviews the credit worthiness of all balances due from
related parties with reference to future profitability.
13. OTHER PAYABLES
Group Group Company Company
2009 2008 2009 2008
GBP GBP GBP GBP
Income tax - 87,855 - -
Interest on long term loan 79,781 67,342 79,781 67,342
Accruals and deferred income 612,048 512,178 156,852 90,679
691,829 667,375 236,633 158,021
The Drectors consider that the carrying amount of these liabilities
approximates their fair value. All payables balances are non-interest bearing.
14. LONG TERM LOAN
On 17 October 2008, the Company completed a long term loan with Africa
Opportunity Fund L.P. "AOF") in the amount of US$5,000,000. The loan is secured
by the Company`s equity interest in Lace Diamond Mines (Pty) Ltd and by the
assets of the Company`s subsidiaries.
The loan is repayable over 36 months as detailed in the schedule below.
AOF Repayment Schedule Capital Interest
repayment payment
Schedule schedule Total
Repayment date (US$) (US$) (US$)
16 April 2009 - 299,178 299,178
16 October 2009 - 300,822 300,822
16 April 2010 500,000 299,178 799,178
16 October 2010 1,000,000 270,740 1,270,740
16 April 2011 1,500,000 209,425 1,709,425
16 October 2011 2,000,000 120,329 2,120,329
5,000,000 1,499,672 6,499,672
Reconciliation of payments made on
long term loan:
Amounts paid as at 31 December 2009 - 600,000 600,000
Amounts due within 1 year 1,500,000 569,918 2,069,918
Amounts due after 1 year 3,500,000 329,754 3,829,754
5,000,000 1,499,672 6,499,672
Interest accrues daily and is payable half-yearly at a rate of 12% with the
portion of the interest relating to the year ended 31 December 2009,
US$124,932, being accrued for in these accounts (GBP78,435).
The cost of the warrants granted to AOF, GBP57,566, (refer note 18) has been
offset against the loan in accordance with IAS 39. The cost of these warrants
is to be expensed over the life of the loan and does not constitute payment
towards the loan. The warrant cost expensed during the period was GBP19,189
(2008 - GBP3,998).
All payments of interest and principal due through 16 April 2010 have been made
and the AOF loan is in good standing. The principal balance due at the date of
approval of these financial statements is US$4,500,000.
15. DEFERRED TAX
2009 2008
GBP GBP
At 1 January (57,723) -
Debit/(Credit) to the income statement 57,723 (57,723)
At 31 December - (57,723)
2009 2008
GBP GBP
Current year credit - (42,383)
Prior year adjustment 57,723 (15,340)
57,723 (57,723)
The deferred tax asset relates to capital allowances in excess of depreciation.
Until it is probable that sufficient taxable profits will be available to allow
all or partial recovery of deferred tax assets of GBP3,325,273 (2008 -
GBP2,163,453), the accounting benefit of tax losses will not be reflected in
the accounts.
16. RELATED PARTY TRANSACTIONS
The Directors consider that there is no ultimate controlling party of the
Company. Transactions between the Company and its subsidiaries, which are
related parties of the Company have been disclosed in the Company section of
this note.
The Directors are considered to be the key personnel of the Group and therefore
all transactions with such individuals have been disclosed below and in the
audited section of the remuneration report.
Details of transactions between the Group and other related parties are
disclosed below.
During the year ended 31 December 2009:
(i) GBP94,000 (2008 - GBP82,000) were paid to the following
companies as Directors` remuneration:
- GBP60,000 to Glendree Capital Management Limited (2008 -
GBP60,000), a Company owned by P R Loudon;
- GBP10,000 to Mining Finance Solutions (2008 - GBP10,000), a
Company owned by E A Worthington;
- GBP12,000 to Loeb Aron & Company Limited (2008 -
GBP12,000), a Company where J Willis-Richards is a
director;
- GBP12,000 to European Islamic Investment Bank plc (2008 -
GBP1,533), represented on the Company`s Board of Directors
by R L Henshall;
In addition, during the year ended 31 December 2009:
(i) DiamondCorp plc incurred rent of GBP25,000 from Loeb Aron &
Company Limited (2008 - GBP25,000).
(ii) Lace incurred consulting fees of GBP1,142 (2008 - GBP4,110) from
The Mineral Corporation, a Company in which G Robbertze,
previously a director of Lace, is a principal.
Company
The Company held a loan to Diamondcorp Holdings Limited of GBP14,659,140 (2008
- GBP13,064,690), to Lace Diamond Mining (Pty) Limited of GBP17,127 (2008 -
GBP17,274) and to Botswana DiamondCorp Limited of GBP100,904 (2008 - GBPnil).
17. SHARE CAPITAL
2009 2008
GBP GBP
Authorised share capital
166,666,666 ordinary shares of 3 pence each 5,000,000 5,000,000
No. GBP No. GBP
Called up, allotted
and fully paid
Ordinary shares of 3
pence each 47,231,995 1,416,960 41,086,995 1,232,610
On 1 February 2007 the Company was admitted to the AIM market and
simultaneously issued 2,750,000 ordinary shares at 90 pence each. In accordance
with the terms of the Convertible Loan Notes, on the date of admission the
notes converted to 6,500,000 ordinary shares.
During the year ended 31 December 2007, 783,330 warrants were exercised for
proceeds of GBP235,000 and the same number of ordinary shares were issued.
On 26 May 2008 the Company listed on the Johannesburg Stock Exchange (JSE) and
simultaneously issued 2,249,923 ordinary shares at the ZAR equivalent of 77.7
pence each.
On 7 November 2008 the Company issued 4,000,000 ordinary shares of 3 pence each
in respect of a private placement completed at 45 pence per ordinary share.
During the year ended 31 December 2008, 66,664 warrants were exercised for
proceeds of GBP19,999 and the same number of ordinary shares were issued.
On 6 November 2009 the Company issued 6,000,000 ordinary shares at 10 pence
each and on 20 November 2009 a further 145,000 ordinary shares were issued at
13.8 pence each.
On 11 January 2010 the trading of DiamondCorp`s shares on the JSE was
transferred to Alt-X.
18. RESERVES
For the year ended 31 December 2009
Share Share
Group Warrant option premium
reserve reserve account
GBP GBP GBP
At 1 January 2009 710,514 320,261 17,460,220
Loss for the year - - -
Warrants expired (136,289) - -
Premium arising on issue of equity
shares - - 435,660
Share option expense in year - 51,414 -
Movement during the year (19,189) - -
Issue costs - - (23,300)
At 31 December 2009 555,036 371,675 17,872,580
Group Retained Translation
losses reserve
GBP GBP
At 1 January 2009 (7,198,253) 209,339
Loss for the year (4,207,079) -
Warrants expired 136,289 -
Premium arising on issue of equity
shares - -
Share option expense in year - -
Movement during the year - 1,285,978
Issue costs - -
At 31 December 2009 (11,269,043) 1,495,317
Share Share
Company Warrant option premium Retained
reserve reserve account losses
GBP GBP GBP GBP
At 1 January 2009 710,514 320,261 17,460,220 (3,304,476)
Loss for the year - - - (876,466)
Warrants expired (136,289) - - 136,289
Premium arising on
issue of equity shares - - 435,660 -
Share option expense
in year - 51,414 - -
Movement during the
year (19,189) - - -
Issue costs - - (23,300) -
At 31 December 2009 555,036 371,675 17,872,580 (4,044,653)
For the year ended 31 December 2008
Share Share
Group Warrant option premium
reserve reserve account
GBP GBP GBP
At 1 January 2008 740,949 282,790 14,116,306
Loss for the year - - -
(Exercise of warrants)/Share premium
on exercise (7,333) - -
Warrants expired (80,668) - -
Premium arising on issue of equity
shares - - 3,378,692
Value of warrants over ordinary shares 57,566 - -
Share option expense in year - 37,471 -
Movement during the year - - -
Issue costs - - (34,778)
At 31 December 2008 710,514 320,261 17,460,220
Group Retained Translation
losses reserve
GBP GBP
At 1 January 2008 (3,000,770) 82,537
Loss for the year (4,285,484) -
(Exercise of warrants)/Share premium
on exercise 7,333 -
Warrants expired 80,668 -
Premium arising on issue of equity
shares - -
Value of warrants over ordinary shares - -
Share option expense in year - -
Movement during the year - 126,802
Issue costs - -
At 31 December 2008 (7,198,253) 209,339
Share Share
Company Warrant option premium Retained
reserve reserve account losses
GBP GBP GBP GBP
At 1 January 2008 740,949 282,790 14,116,306 (1,608,313)
Loss for the year - - (1,784,164)
(Exercise of
warrants)/Share premium
on exercise (7,333) - - 7,333
Warrants expired (80,668) - 80,668
Premium arising on
issue of equity shares - - 3,378,692 -
Issue of warrants over
ordinary shares 57,566 - -
Share option expense in
year - 37,471 -
Issue costs - - (34,778) -
At 31 December 2008 710,514 320,261 17,460,220 (3,304,476)
WARRANTS
Warrant
Warrants reserve
in issue GBP
Group and Company
At 31 December 2009 6,066,666 555,036
Group and Company
At 31 December 2008 7,316,666 710,514
(i) Vendor Warrants
The vendors of Crown Diamond Mining Limited (which changed its name to
Diamondcorp Holdings Limited in 2007) were entitled to be issued on completion
of the sale of its ordinary share capital to the Company with a total of
4,166,666 warrants to subscribe for ordinary shares of 3 pence each at a price
of the lower of 180 pence or price at which the Company raises equity finance
on admission to the Alternative Investment Market (90 pence). These warrants
expire on 1 February 2012, being five years from the date of admission to the
Alternative Investment Market. Certificates in relation to these warrants were
issued on 30 June 2006 following and taking into account, the consolidation of
the Company`s share capital on that date.
These warrants were valued by the Directors using the Black-Scholes valuation
model, based on the assumptions as detailed below.
(ii) AOF Warrants
In 2008 a warrant was issued to Africa Opportunity Fund to subscribe for
1,650,000 ordinary shares of 3 pence each, exercisable at 65.3 pence for a
period of 36 months from the date of grant, 17 October 2008.
These warrants were valued by the Directors using the Black-Scholes valuation
model, based on the assumptions as detailed below.
(iii) BBK Warrants
In 2007 a warrant was issued to BBK Consultancy plc to subscribe for 250,000
ordinary shares of 3 pence each for a period of 3 years at an exercise price of
121.5 pence. The warrants vest when the Company`s share price is above 135
pence per share for 28 consecutive trading days and are exercisable at any time
up to and including 30 April 2011.
These warrants were valued by the Directors using the Black-Scholes valuation
model, based on the assumptions as detailed below.
(iv) Loeb Aron Warrants
In reference to work performed on fundraisings by Loeb Aron & Company Limited,
Loeb Aron were issued warrants over 250,000 ordinary shares of 3 pence each for
a period of two years from the date of admission to the Alternative Investment
Market, exercisable at 105 pence per share. These warrants expired on 1
February 2009.
These warrants were valued by the Directors using the Black-Scholes valuation
model, based on the assumptions as detailed below.
(v) Cenkos Warrants
In January 2007, Cenkos Securities plc, the Company`s nominated advisor and
broker, received warrants to subscribe for up to 1,000,000 ordinary shares of 3
pence each exercisable at 121.5 pence for a period of 24 months from date of
admission to the AIM market. These warrants expired on 1 February 2009 These
warrants were valued by the Directors using the Black-Scholes valuation model,
based on the assumptions as detailed below.
(vi) Loan Note Warrants
The holders of convertible loan notes which were converted into 4,750,000
ordinary shares of 1 penny each on 21 December 2005, were entitled to be
issued, on conversion, with a total of 1,583,333 warrants to subscribe for
ordinary shares of 3 pence each at the lower of 180 pence per share or price at
which the Company issued ordinary shares of 3 pence each on admission to the
Alternative Investment Market.
The exercise price was reduced to 30 pence per ordinary share when admission
did not take place prior to 30 April 2006. These warrants expired on 30 April
2008 with 66,664 warrants being exercised before the expiry date. Certificates
in relation to these warrants were issued on 30 June 2006 following and taking
into account, the consolidation of the Company`s share capital on that date.
These warrants were valued by the Directors using the Black-Scholes valuation
model, based on the assumptions as detailed below.
Black-Scholes Loan Note Vendor Loeb Aron
Assumptions Warrants* Warrants* Warrants
Term range 2 years 5.6 years 2 years
Expected dividend Nil Nil Nil
yield
Risk free interest rate 5% 5% 5%
Share price volatility 55 % 55 % 55 %
Share price at time of grant 45 pence 45 pence 90 pence
Black-Scholes Cenkos BBK AOF
Assumptions Warrants Warrants Warrants
Term range 2 years 3 years 0.5 years
Expected dividend Nil Nil Nil
yield
Risk free interest rate 5% 5% 2%
Share price volatility 55 % 40 % 40 %
Share price at time of grant 90 pence 90 pence 56.5 pence
* These warrants were subject to the share consolidation on 30 June 2006.
SHARE OPTIONS (refer note 19)
Stock
Stock option
options reserve
in issue GBP
Group and Company
At 31 December 2009 2,685,000 371,675
Group and Company
At 31 December 2008 2,945,000 320,261
(i) 2007 UK Options
During 2007, options over 2,940,000 ordinary shares of 3 pence each were
granted to employees and management of the Company, exercisable at 135 pence
for a period of 10 years from the date of issue.
270,000 of these options vested on grant and the balance vest over 3 years at
one-third at each anniversary of the issue date. 690,000 of these options were
forfeited during 2008 by reason of retirement.
Share options granted during the year ended 31 December 2007 were valued by the
Directors using the Black-Scholes valuation model, based upon the assumptions
as detailed below:
(ii) The DiamondCorp Share Option Plan
During 2008, a share option plan was approved and registered in the Republic of
South Africa to provide eligible employees of the Group with the opportunity to
acquire as incentive an interest in the equity of the Company. Eligible
employees were granted options over 695,000 ordinary shares of 3 pence each,
exercisable at 50 pence for a period of 10 years from the date of issue, 16
December 2008. These options vest over 3 years at one-third at each anniversary
of the issue date.
These options were valued by the Directors using the Black-Scholes valuation
model, based upon the assumptions as detailed below.
Black-Scholes Assumptions The
2007 DiamondCorp
UK Option Share Option
Plan Plan
Term range 3 years 3 years
Expected dividend yield Nil Nil
Risk free interest rate 5% 2%
Share price volatility 40 % 40 %
Share price at time of grant 90 pence 34.5 pence
19. SHARE BASED PAYMENTS
Equity-settled share option scheme
The Company has a share option scheme for all employees of the Group. Options
are exercisable at a price equal to the average quoted market price of the
Company`s shares on the date of grant. The vesting period is three years. If
the options remain unexercised after a period of ten years from the date of
grant the options expire. Options are generally forfeited if the employee
leaves the Group before the options vest.
Details of the share options outstanding during the year are as follows.
2009 2008
Weighted Weighted
average average
Number of exercise Number of exercise
share price share price
options (GBP) options (GBP)
Outstanding at beginning
of year 2,945,000 115p 2,940,000 135p
Granted during the year 200,000 50p 695,000 50p
Forfeited during the year (460,000) (690,000)
Exercised during the year - -
Expired during the year - -
Outstanding at the end of
the year 2,685,000 124p 2,945,000 115p
Exercisable at the end of
the year 1,588,333 129p 930,000 135p
The options outstanding at 31 December 2009 had a weighted average exercise
price of 124p, and a weighted average remaining contractual life of
8.3 years. The aggregate of the estimated fair values of the options granted on
those dates is GBP414,942. At 31 December 2008, 2,945,000 options were
outstanding at a weighted average exercise price of 115p.
The inputs into the Black-Scholes model are as follows:
2009 2008
Weighted average share price 30.5p 34.5p
Weighted average exercise price 50p 50p
Expected volatility 40% 40%
Expected life 3 years 3 years
Risk-free rate 2% 2%
Expected dividend yields 0% 0%
Expected volatility was determined based on management`s best estimate. The
expected life used in the model has been adjusted, based on management`s best
estimate, for the effects of non-transferability, exercise restrictions, and
behavioural considerations.
During 2009, the Group recognised total expenses of GBP51,414 (2008 -
GBP37,471) relating to equity- settled share-based payment transactions.
20. FINANCIAL INSTRUMENTS
Group and Company
Capital risk management
The Group manages its capital to ensure that entities in the Group will be able
to continue as going concerns while maximising the return to stakeholders
through the optimisation of the debt and equity balance. The capital structure
of the Group consists of debt, which includes the borrowings disclosed in note
15, cash and cash equivalents and equity attributable to equity holders of the
parent, comprising issued capital, reserves and retained earnings as disclosed
in note 18.
Significant accounting policies
Details of the significant accounting policies and methods adopted, including
the criteria for recognition, the basis of measurement and the basis on which
income and expenses are recognised, in respect of each class of financial
asset, financial liability and equity instrument are disclosed in note 1 to the
financial statements.
Categories of financial instruments
Group Company
Carrying value Carrying value
2009 2008 2009 2008
GBP GBP GBP GBP
Financial assets
Loans and receivables
(including cash and
cash
equivalents) 288,188 3,352,276 14,938,769 15,376,948
Financial liabilities
Amortised cost 3,635,129 3,822,819 3,206,945 55,679
Financial risk management objectives
The Group`s financial function provides services to the business, monitors and
manages the financial risks relating to the operations of the Group. These
risks include market risk (including currency risk, fair value interest rate
risk and price risk), credit risk, liquidity risk and cash flow interest rate
risk.
The Group does not enter into or trade financial instruments, including
derivative financial instruments, for any purpose.
Market risk
The Group`s activities expose it primarily to the financial risks of changes in
foreign currency exchange rates. There has been an increase in the Group`s
exposure to market risks due to the long term loan obtained during the year.
The manner in which the Group measures and manages the risk has not changed.
Foreign currency risk management
The Group undertakes certain transactions denominated in foreign currencies.
Hence, exposures to exchange rate fluctuations arise.
The carrying amounts of the Group`s and Company`s foreign currency denominated
monetary assets and monetary liabilities at the reporting date are as follows:
Assets (Liabilities)
2009 2008
GBP GBP
Cash denominated in South African Rand 128,830 1,188,930
Cash denominated in United States Dollar 3,540 414,393
Long term loan denominated in United States
Dollar (3,139,126) (3,453,277)
Foreign currency sensitivity analysis
The Group is exposed to the currency of South Africa (Rand) and the United
States Dollar.
The following table details the Group`s sensitivity to a 20% increase and
decrease in the Sterling against South African Rand and United States Dollar.
20% is the sensitivity rate used when reporting foreign currency risk
internally to key management personnel and represents management`s assessment
of the reasonably possible change in foreign exchange rates. The sensitivity
analysis includes only outstanding foreign currency denominated monetary items
and adjusts their translation at the period end for a 20% change in foreign
currency rates. A negative number below indicates a decrease in profit where
the Sterling strengthens 20% against the relevant currency. For a 20% weakening
of the Sterling against the relevant currency, there would be an equal and
opposite impact on the profit and the balances below would be positive.
Rand currency impact
2009 2008
GBP GBP
Loss due to a 20% change against ZAR 21,472 198,155
Loss due to a 20% change against USD (522,598) (506,481)
The Group`s sensitivity to foreign currency has increased during the current
period, because the Company held higher balances of foreign currency.
In management`s opinion, the impact of the sensitivity analysis is
representative.
Liquidity risk management
Ultimate responsibility for liquidity risk management rests with the Board of
Directors, which has built an appropriate liquidity risk management framework
for the management of the Group`s short term funding and liquidity management
requirements. The Group manages liquidity risk by maintaining adequate
reserves, by continuously monitoring forecast and actual cash flows and
matching the maturity profiles of financial assets and liabilities.
Liquidity and interest risk tables
The following table details the Group`s remaining contractual maturity for its
non-derivative financial liabilities. The tables have been drawn up based on
the undiscounted cash flows of financial liabilities based on the earliest date
on which the Group can be required to pay. The table includes the principal
cash flows.
Group
Weighted
average Less
effective than 1A-2
interest rate 1 year years
% GBP GBP
2009
Non-interest bearing 530,382 -
Finance lease liability 14.20 % 46,323 27,022
Fixed interest rate instruments 12.00 % 1,299,547 2,404,416
1,876,252 2,431,438
2+
years Total
GBP GBP
Non-interest bearing - 530,382
Finance lease liability - 73,345
Fixed interest rate instruments - 3,703,963
- 4,307,690
2008
Weighted
average Less
effective than 1A-2
interest rate 1 year years
% GBP GBP
Non-interest bearing 278,273 -
Finance lease liability 14.20 % 35,330 35,330
Fixed interest rate instruments 12.00 % 414,600 1,281,279
728,203 1,316,609
2+
years Total
GBP GBP
Non-interest bearing - 278,273
Finance lease liability 20,609 91,269
Fixed interest rate instruments 2,370,618 4,066,497
2,391,227 4,436,039
Company
Weighted
average Less
effective than 1A-2
interest rate 1 year years
% GBP GBP
2009
Non-interest bearing 102,198 -
Fixed interest rate instruments 12.00 % 1,299,547 2,404,416
1,401,745 2,404,416
2+
years Total
GBP GBP
Non-interest bearing - 102,198
Fixed interest rate instruments - 3,703,963
- 3,806,161
Weighted
average Less
effective than 1A-2
interest rate 1 year years
% GBP GBP
2008
Non-interest bearing 55,679 -
Fixed interest rate instruments 12.00 % 414,600 1,281,279
470,279 1,281,279
2+
years Total
GBP GBP
Non-interest bearing - 55,679
Fixed interest rate instruments 2,370,618 4,066,497
2,370,618 4,122,176
The following table details the Group`s and Company`s expected maturity for its
non-derivative financial assets. The tables below have been drawn up based on
the undiscounted contractual maturities of the financial assets including
interest that will be earned on those assets.
Group Company
Weighted Weighted
average average
effective Less than 1 effective Less than 1
interest rate month interest rate month
% GBP % GBP
2009
Non-interest bearing 288,188 161,598
Fixed
interest
rate
instruments 10.09 % - -
288,188 161,598
2008
Non-interest bearing 2,600,971 2,295,131
Fixed
interest
rate
instruments 10.09 % 777,305 -
3,378,276 2,295,131
21. SUBSIDIARIES
Details of the Company`s subsidiaries at 31 December 2009 were as follows:
Place of Proportion
incorporation of
(or registration) ownership
Name of subsidiary and operation interest
%
DiamondCorp Holdings British Virgin 100
Limited (1) Islands
Botswana DiamondCorp British Virgin 100
Limited Islands
Lace Diamond Mines (Pty) Republic of 74
Limited South Africa
Soapstone Investments Republic of 100
(Pty) Limited South Africa
Proportion
of voting
power held
Name of subsidiary % Principal activity
DiamondCorp Holdings 100 Holding Company of a
Limited (1) Trading Group
Botswana DiamondCorp 100 Holding Company
Limited
Lace Diamond Mines (Pty) 74 Diamond exploration and
Limited exploitation
Soapstone Investments 100 Investment Company
(Pty) Limited
(1) Formerly named Crown Diamond Mining Limited
22. SUBSEQUENT EVENTS
In April 2010 the Company placed 101,062,538 ordinary shares at 7 pence each
for gross proceeds of GBP7.1 million.
Date: 25/06/2010 13:05:11 Produced by the JSE SENS Department.
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