| Thu 19 Jun 2003, 10:18 | | Afgem sets up SA diamond subsidiary |
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Resources Correspondent
AFRICAN Gem Resources (Afgem) has set up an SA diamond subsidiary, Afgem Diamonds, as part of a strategy to set up an empowerment diamond business that will capitalise on opportunities arising from SA's new mining dispensation.
Michael Nunn, chairman and CE of the JSE Securities Exchange SAlisted Afgem, said its new subsidiary was already in talks with potential empowerment partners.
The Minerals and Petroleum Resources Development Act requires that mineral rights that are not being exploited or where there are no plans to develop mining operations have to be ceded to the state.
This is part of what has been labelled the "use it or lose it" principle in the new legislation. Afgem Diamonds would, perhaps, be looking to gain prospecting and mining rights as properties which are not being mined become available.
"The new company is to be used as a vehicle which will look at medium-scale, primary-sourced diamond opportunities (such as small kimberlites )," said Nunn.
He said that Afgem, which mines the violet-blue gem tanzanite in Tanzania, had expertise in mine development and operations and the company wanted to position itself to take advantage of the situation.
Yesterday, Afgem reported a loss for the full year ended March 31 as the rand's appreciation weighed on the company's earnings.
In the 12 months Afgem recorded a net loss of R13,9m compared to a profit of R17m in the same period last year. "The appreciation in the value of the rand gave rise to a total foreign exchange loss in the group of R13,3m, compared to a R16,6m gain in the previous period," it said.
Afgem posted a loss of 13,24c a share compared with a profit of 11,56c a share for the comparable period last year. "If you strip away forex losses, we would have made a profit," said Nunn.
Afgem said its share of the world tanzanite market grew in the year and prices of tanzanite "were encouraging".
"We have grown sales in the local market (southern Africa). In the last two years, sales in this market have grown twofold ," said Nunn.
Afgem also had to write off stock to the value of R7,6m in the year as a result of the strengthening rand. This further affected earnings.
The company said it had introduced productivity and cost containment initiatives during the year and was continuing with these.
"The cumulative benefits of these initiatives will become apparent in the 2004 financial year."
In the reporting period, Afgem paid cash for another 10% in Merelani Mining, its Tanzanian subsidiary. Nunn said the company now held 100% of Merelani.
Jun 19 2003 06:10:46:000AM Julie Bain Business Day 1st Edition
Thursday
19 June 2003
