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Firestone Diamonds Hit by Weak Market Conditions, Losses Up in FY2019

publish:2020-01-07

Firestone Diamonds plc, which operates the Liqhobong Diamond Mine in Lesotho, released its final audited results for the year ended June 30, 2019 (FY2019) noting that it was a “disappointing year for the Company despite a solid operational performance, which saw revenues decline due to a weak diamond market and a reduction in carats sold”.
 
The Company recorded a 21% increase in total tonnes mined to 8.1 million tonnes (2018: 6.7 mt), a 53% increase in waste tonnes mined (2018: 2.9 mt) and a higher grade of 22.6 carats per hundred tonnes (2018: 22.0 cpht). It also reported a lower operating cost per tonne treated of US$11.48 (2018: US$11.62).
 
While the 829,458 carats recovered during the year was only marginally lower that the 835,832 carats recovered in 2018, sales, at 774,830 carats, dipped slightly more, ending well below the 831,637 carats sold in 2018.
 
This resulted in lower revenue of US$57.2 million (2018: US$62.2 million) and lower average diamond value per carat realised of US$73 (2018: US$75). Firestone reported a loss of US$56.9 million (2018: US$14.2 million), which includes an impairment charge of US$41.6 million and a deferred tax charge of US$6.3 million.
 
It should be noted, the Company said, that due to the timing, seven sales were held during the year compared to eight sales in the previous year.
 
Reiterating that the Company had delivered results within the guidance range for all items within its control, Paul Bosma, Chief Executive Officer, said, "From a diamond pricing perspective, it was a tough year, particularly for the smaller, lower value goods and these conditions are expected to persist for the foreseeable future until the end of 2020 when global rough supply is expected to reduce.”
 
The Company’s Non-Executive Chairman Lucio Genovese noted, “Firestone realised an average diamond value for the year that was marginally weaker than a year earlier, mainly due to lower prices for smaller run-of-mine diamonds, with larger diamonds helping to boost the average value.”
 
Genovese added, “Several larger, more valuable diamonds, the occurrence of which is unpredictable, were recovered in the year. Highlights in this category included several plus-50 carat white and yellow diamonds, as well as some other, smaller high-valued coloured diamonds.”
 
The report notes that the largest diamond recovered to date in October 2018 was a 311 carat near‐gem diamond; and the most valuable diamond sold to date in March 2019 was a 70-carat white makeable diamond which realised US$1.6 million, just ahead of the 46-carat white cleavage diamond which sold for US$1.2 million. The average value of Liqhobong's larger, better quality diamonds, which includes all diamonds larger than 10.8 carats, was 48% higher than in the prior year, it added.
 
Bosma also stated, “We expect the prices of larger, better quality diamonds to remain strong and for this to partially offset the impact of low prices for ROM diamonds which we expect to remain at current levels over the medium term.”
 
Firestone’s Diamond Reserve was updated at the end of the financial year to account for mining that took place during the year. Therefore, as at June 30, 2019, the total Probable Reserve was 25.230 million tonnes at a grade of 22 cpht containing 5.623 million carats, which is an 11.6% increase compared to the 2018 Probable Diamond Reserve statement. Firestone said that improved pit design optimisation initiatives resulted in increased recoverable reserves during the period.
 
Source: GJEPC

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