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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Firestone Diamonds Plc | LSE:FDI | London | Ordinary Share | GB00BKX59Y86 | ORD 1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 0.20 | 0.15 | 0.25 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMFDI
RNS Number : 2292U
Firestone Diamonds PLC
28 March 2019
28 March 2019
Firestone Diamonds plc
("Firestone", the "Group" or the "Company") (AIM: FDI)
Unaudited Interim Results for the six months to 31 December 2018
Firestone Diamonds plc, the AIM-quoted diamond mining company, is pleased to announce its unaudited interim results for the six months ended 31 December 2018 ("H1 2019" or the "Period").
HIGHLIGHTS FOR THE PERIOD
LIQHOBONG DIAMOND MINE ("Liqhobong" or the "Mine")
On track to meet guidance:
-- 1.9 million tonnes ("mt") treated in the period (H1 2018: 1.9mt), within full year guidance of between 3.6mt and 3.8mt;
-- Higher average grade of 24.6 carats per hundred tonnes ("cpht") in the period (H1 2018: 19.9 cpht) mainly due to treating more of the higher grade ore blocks in the southern part of the open pit;
-- 465 680 carats recovered (H1 2018: 379 716 carats), within full year guidance range of between 820 000 and 870 000 carats, and including the recovery of the largest diamond to date, a 326 carat light yellow makeable stone;
-- Average value per carat of US$71 (H1 2018: US$74) realised in the period, impacted by prices for smaller, lower value diamonds;
-- Cash operating cost per tonne treated (including waste) of US$10.96 (H1 2018: US$11.97), well below full year guidance of US$15-16 per tonne treated; and
-- 1.9mt of waste stripped, with a plan in place to increase waste tonnes mined to meet full year guidance of between 4.3mt and 4.8mt.
FINANCIAL
-- Revenue of US$27.4 million from three sales (H1 2018: US$26.0 million from four sales); -- EBITDA(1) of US$5.9 million (H1 2018: US$7.3 million); -- Loss for the period of US$6.6 million (H1 2018: US$7.8 million); -- Loss per share of 1.3 US cents (H1 2018: 2.2 US cents);
-- Positive cash flow of US$6.7 million generated from operations during the period (H1 2018: US$2.1 million(2) ); and
-- Cash balance at 31 December of US$26.2 million (H1 2018: US$29.7 million).
POST PERIOD
-- An average value of US$90 per carat was realised at the most recent sale which concluded on 22 March, resulting in a higher average value realised of US$80 for the third quarter of the financial year, and US$74 per carat for the first nine months of the financial year;
-- Record price realised for a single stone sold from Liqhobong, a 70 carat diamond recovered in January;
-- Positive impact of weaker LSL:US$ exchange rates on mine operating costs expected to continue as currency hedging in place for the remainder of the 2019 financial year at average rates exceeding LSL14.50:US$1; and
-- First significant rains of the season have yet to arrive on site, management are keeping a close watch on water levels in the reservoirs, currently estimated at two to three months' supply.
(1) - The measure of operational cash performance calculated as earnings before interest, tax, depreciation and amortisation.
(2) - Amount is calculated as cash generated from operations of US$8.8 million less US$6.7 million of capitalised waste stripping costs which were subsequently expensed at the 2018 year-end.
Paul Bosma, Chief Executive Officer of Firestone, commented:
"The second half of 2018 saw a global price slump in the smaller, lower value goods which negatively impacted our average dollar per carat achieved. Since then, prices have stabilised at these lower levels and we are looking forward to some improvement once inventory levels in the midstream of the diamond market normalise. Production is on track to meet guidance and we once again did well to manage costs, which are well below full year guidance. Pleasingly, we sold our most valuable stone to date at the recent sale, a 70 carat makeable recovered in January, and aided by a modest price increase in the smaller fraction we realised our highest average sale price since declaring commercial production in mid-2017 of US$90/ct."
The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 ("MAR").
For further information, please visit www.firestonediamonds.com or contact:
Hot Features
Premium
+44 (0)20 8741
Firestone Diamonds plc 7810
Paul Bosma
Grant Ferriman
Macquarie Capital (Europe) Limited (Nomad
and Broker) +44(0)20 3037 2000
Nick Stamp
Nicholas Harland
+44 (0)20 7920
Tavistock (Public and Investor Relations) 3150
Jos Simson
Gareth Tredway
Annabel de Morgan
Background information on Firestone
Firestone is an international diamond mining company with operations in Lesotho. Firestone commenced commercial production in July 2017 at the Liqhobong Diamond Mine. Liqhobong is owned 75% by Firestone and 25% by the Government of Lesotho. Lesotho is one of Africa's significant new diamond producers, hosting Gem Diamonds' Letšeng Mine, Firestone's Liqhobong Mine, Namakwa Diamonds' Kao Mine and Lucapa's Mothae Mine.
OPERATIONAL REVIEW FOR THE 6 MONTH PERIODING 31 DECEMBER 2018
Introduction
The strong operational performance achieved in 2018, Liqhobong's first full year of commercial production, continued into the first half of 2019. Tonnages treated for the period were in-line with expectation despite unscheduled repair work on one of the scrubbers which resulted in lower throughput for a short time.
During the first quarter, there was an unfortunate lost time injury after having worked 6.7 million injury-free man hours. Thankfully the incident was not too serious with the employee returning to work three days later. The Company takes safety very seriously and no lost time injuries were recorded since then.
The demand for smaller diamonds, below 3 grainers (<0.66ct), remained subdued during the first 6 months of the financial year, mainly as a result of pressure on the Indian midstream. This led to a lower average value achieved of US$71 per carat for the period. Pleasingly there continued to be strong demand for our special diamonds during the period.
Production
Production H1 2019 H1 2018 FY2018
--------------------------- ---------- -------- --------
1 907 3 802
Ore (tonnes) 1 896 575 795 568
1 488 2 910
Waste (tonnes) 1 863 164 073 636
3 395 6 713
Total (tonnes) 3 759 739 868 204
--------------------------- ---------- -------- --------
Carats recovered (carats) 465 680 379 716 835 832
Grade (carats per hundred
tonnes) 24.6 19.9 22.0
--------------------------- ---------- -------- --------
The strong operational performance at the end of the 2018 financial year continued into the early part of the current financial year, resulting once again in a solid operational performance.
Liqhobong treated 1,896,575 tonnes of ore during the period which was marginally lower than the 1,907,795 tonnes treated in H1 2018, despite experiencing a period of approximately 3 weeks of reduced production throughput as a result of unscheduled repair work that was required on one of the two scrubbers during November 2018.
The average grade was higher during the period at 24.6 carats per hundred tonnes ("cpht") compared to 19.9 cpht in H1 2018, mainly due to treating proportionately more of the higher grade ore blocks in the southern part of the open pit. The higher grade resulted in 23% more carats recovered for the period of 465,680 compared to 379,716 carats in H1 2018.
A total of 1,863,164 tonnes of waste was mined during the period compared to 1,488,073 tonnes in H1 2018 as waste stripping of Cut 2 south commenced and new access roads and excavation platforms were established. The establishment of the new access roads and platforms took longer than expected due to the steep topography of the Cut 2 work area, resulting in fewer waste tonnes mined than expected.
Life of mine
During the period, the work on the Life of Mine ("LOM") plan was completed to determine the viability of a Cut 3 extension based on optimised slope angles. The results indicated that a Cut 3 could increase the life of mine by 3 years and result in 40% more carats compared to the current 8 year mine plan. However, at the current average diamond values realised and based on current economic assumptions, the cost of the additional Cut 3 waste tonnes renders the extension uneconomically viable at this stage.
The Company will however keep under review the option to extend the mine life should economic conditions, particularly the average value per carat and projected price growth assumptions, improve. The Company retains the ability to revert to the longer term plan until FY2021, after which time a mine life extension would become significantly more costly due to the increased amount of waste tonnes that would need to be mined.
Health and safety
The Company considers the health and safety of its employees and contractors a top priority as the results indicate. Liqhobong recorded its first lost time injury during the period having worked a total of 6.7 million man-hours since project commencement in July 2014. Fortunately, the incident was not too serious. The operational team will continue to focus on safety in the workplace as a priority in an effort to maintain the exemplary safety record.
Diamond sales
Diamond sales H1 2019 H1 2018 FY2018 ------------------------ -------- -------- -------- Diamonds sold (carats) 385 941 352 272 831 638 Revenue (US$'m) 27.4 26.0 62.2 Average value (US$/ct) 71 74 75 Number of sales 3 4 8 ------------------------ -------- -------- --------
A total of 385,941 carats were sold across three sales during the period compared to 352,272 carats across four sales during H1 2018. Total sales for the period of US$27.4 million was marginally higher than sales of US$26.0 million in H1 2018 despite a lower average value realised of US$71/ct (H1 2018: US$74/ct) as a result of the higher quantity of carats sold. The lower average value realised during the period was due mainly to the decrease in prices for run of mine production (minus 3 grainers), which comprises approximately 80% of Liqhobong's production, as a result of pressure on the Indian midstream due to a weaker local currency, high inventory levels and reduced lending into the industry. Pricing for larger, more valuable diamonds remained robust during the period as evidenced by a 68 carat white makeable which sold for more than US$900k.
Operating costs
Management is committed to stringent cost management and as a result, cash operating costs for the period of US$10.96 per tonne treated were lower than H1 2018 of US$11.97 per tonne treated. The lower cash operating cost per tonne treated can mainly be attributed to the weaker local currency, the Lesotho Maloti which was 5% weaker against the dollar at LSL14.15:US$1 for the period compared to LSL13.42:US$1 in H1 2018, and also to the fewer waste tonnes mined in the period.
The accounting cost per tonne treated includes non-cash items such as depreciation and amortisation charges and amounted to US$13.37 per tonnes treated which was significantly lower than the cost per tonne treated in H1 2018 of US$16.32.
Cost per tonne treated (US$/tonne) H1 2019 H1 2018 FY2018 ------------------------------------ -------- -------- ------- Cash operating cost (incl. waste) 10.96 11.97 11.62 Accounting cost 13.37 16.32 14.45 ------------------------------------ -------- -------- -------
Cashflow
During the period, the Group generated cash of US$6.7 million from operations including waste stripping costs, which compared favourably to H1 2018 of US$2.1 million after adjusting for US$6.7 million of capitalised waste stripping costs. A decrease in working capital of US$4.1 million, which was mainly due to the receipt of the June 2018 sale proceeds in July 2018, resulted in net cash flow from operating activities of US$10.8 million (H1 2018: US$4.1 million). The cash generated was sufficient to fund US$0.7 million of stay in business capital at Liqhobong and net debt service costs of US$2.4 million, resulting in a net increase in cash of US$7.7 million for the period (H1 2018: net increase in cash of US$12.2 million after net proceeds from a capital raise and Series A Eurobond facility of US$26.0 million).
The Group ended the period with a cash balance of US$26.2 million (H1 2018: US$29.7 million).
Impairment of BK11
The value of the BK11 asset, which is no longer considered core to the Group's business, was impaired by US$2.2 million during the period.
Conclusion
The Group has once again performed well from an operational perspective with all of its key metrics on track to meet guidance by the year-end. We have demonstrated that the production plant is capable of treating ore at rates exceeding its nameplate capacity which has assisted in making up processing shortfalls which have resulted from unexpected interruptions as mentioned previously. Mine development is slightly behind schedule, however plans are in place to increase waste mining over the coming months and we expect to achieve our guidance range of between 4.3mt and 4.8mt by the year-end.
Operating costs remain well managed and even though we anticipate an increase over the second half of the year due to higher waste tonnages, we still expect these to remain well below the lower end of guidance of between US$15 and US$16 per tonne treated.
The average value realised for the three sales during the first half of the financial year was disappointing and unfortunately mainly the result of a downturn in the market for smaller diamonds. On a positive note, we saw a modest improvement in pricing for this segment at the recent sale and are hopeful that this trend will continue as the over-stocking works its way through the pipeline. Despite the weaker pricing environment, the Group generated positive cash flow of US$6.7 million from operations during the period. Pleasingly, pricing has remained robust for the larger, better quality diamonds.
Consolidated Statement of Comprehensive Income
For the six months ended 31 December 2018
(Unaudited)
6 months 6 months
ended ended Year ended
31 December 31 December 30 June
2018 2017 2018
Unaudited Unaudited Audited
Note US$'000 US$'000 US$'000
Revenue 2 27 382 25 990 62 246
Cost of sales 21 945 23 415 57 116
------------ ------------ -----------
Gross Profit 5 437 2 575 5 130
Other income 764 443 1 267
Total administrative expenses 8 185 6 977 13 707
------------ ------------ -----------
Other administrative expenses 1 144 957 1 784
Diamond royalty and selling
expenses 1 800 1 674 4 318
Impairment charge 3 2 239 - -
Amortisation and depreciation 1 069 1 252 2 408
Share-based payments 391 1 464 1 345
Care and maintenance 120 - 485
Corporate expenses 1 422 1 630 3 367
------------ ------------ -----------
Loss before finance charges
and income tax (1 984) (3 959) (7 310)
Finance income 697 67 794
Finance costs 4 5 385 6 427 11 021
------------ ------------ -----------
Loss before tax (6 672) (10 319) (17 537)
Taxation credit 5 25 2 569 3 304
-----------
Loss after tax for the period (6 647) (7 750) (14 233)
------------ ------------ -----------
Loss after tax for the period
attributable to:
Owners of the parent (6 794) (7 180) (11 635)
Non-controlling interest 147 (570) (2 598)
------------ ------------ -----------
Loss after tax for the period (6 647) (7 750) (14 233)
------------ ------------ -----------
Other comprehensive income:
Items that may be reclassified
subsequently to profit and loss
Exchange gains on translating
foreign operations net of tax (5 436) 5 540 (7 426)
Profit on cash flow hedges (79) 349 791
------------ ------------ -----------
Other comprehensive income (5 515) 5 889 (6 635)
------------ ------------ -----------
Total comprehensive loss for
the period (12 162) (1 861) (20 868)
------------ ------------ -----------
Total comprehensive loss for
the period attributable to:
Owners of the parent (10 635) (2 790) (16 432)
Non-controlling interests (1 527) 929 (4 436)
------------ ------------ -----------
Total comprehensive loss for
the period (12 162) (1 861) (20 868)
------------ ------------ -----------
Loss per share
Basic and diluted loss per share
(US cents) 6 (1.3) (2.2) (2.8)
Consolidated Statement of Financial Position
As at 31 December 2018
(Unaudited)
31 December 31 December 30 June
2018 2017 2018
Unaudited Unaudited Audited
Note US$'000 US$'000 US$'000
ASSETS
Non-current assets
Property, plant and equipment 7 89 274 119 859 101 220
Deferred tax 8 6 058 6 627 6 501
Loan receivable 754 - 487
Total non-current assets 96 086 126 486 108 208
------------ ------------ ----------
Current assets
Inventories 9 9 724 9 961 5 881
Trade and other receivables 1 916 3 001 13 288
Other financial assets 172 - 265
Cash and cash equivalents 26 230 29 688 18 421
------------ ------------ ----------
Total current assets 38 042 42 650 37 855
------------ ------------ ----------
Total assets 134 128 169 136 146 063
============ ============ ==========
EQUITY
Share capital 10 166 469 166 094 166 239
Share premium 192 191 190 056 191 201
Reserves (27 532) (14 280) (24 201)
Accumulated losses (262 271) (252 587) (255 607)
------------ ------------ ----------
Total equity attributable
to equity holders of the
parent 68 857 89 283 77 632
Non-controlling interests (48 157) (41 265) (46 630)
------------ ------------ ----------
Total equity 20 700 48 018 31 002
------------ ------------ ----------
LIABILITIES
Non-current liabilities
Borrowings 11 90 596 99 169 94 225
Provisions 4 277 4 566 4 313
------------ ------------ ----------
Total non-current liabilities 94 873 103 735 98 538
------------ ------------ ----------
Current liabilities
Borrowings 11 6 628 285 2 143
Other financial liabilities - 24 -
Trade and other payables 11 457 16 625 14 055
Provisions 470 449 325
Total current liabilities 18 555 17 383 16 523
------------ ------------ ----------
Total liabilities 113 428 121 118 115 061
------------ ------------ ----------
Total equity and liabilities 134 128 169 136 146 063
============ ============ ==========
Consolidated Statement of Changes in Equity
For the six months ended 31 December 2018
(Unaudited)
Share-based
Share Share Warrant Merger Hedging payment Translation Accumulated Non-con-trolling Total
capital premium reserve reserve Reserve reserve reserve losses Total interest equity
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Balance at 31
December
2017
(Unaudited) 166 094 190 056 7 609 (1 614) 239 7 935 (28 449) (252 587) 89 283 (41 265) 48 018
-------- -------- -------- -------- -------- ------------ ------------ ------------ --------- ----------------- ---------
Loss for the
period - - - - - - - (4 455) (4 455) (2 028) (6 483)
Foreign currency
translation
differences - - - - - - (9 557) - (9 557) (3 460) (13 017)
Profit on cash
flow
hedges - - - - 370 - - - 370 123 493
-------- -------- -------- -------- -------- ------------ ------------ ------------ --------- ----------------- ---------
Total
comprehensive
loss for the
period - - - - 370 - (9 557) (4 455) (13 642) (5 365) (19 007)
-------- -------- -------- -------- -------- ------------ ------------ ------------ --------- ----------------- ---------
Contributions by
and
distributions to
owners
Issue of
ordinary shares 145 1 145 - - - - - - 1 290 - 1 290
Share-based
payment
transactions - - - - - 701 - - 701 - 701
Share-based
payment
lapse/reversals - - - - - (1 435) - 1 435 - - -
Total
contributions
by and
distributions
to owners 145 1 145 - - - (734) - 1 435 1 991 - 1 991
-------- -------- -------- -------- -------- ------------ ------------ ------------ --------- ----------------- ---------
Balance at 30
June
2018 (Audited) 166 239 191 201 7 609 (1 614) 609 7 201 (38 006) (255 607) 77 632 (46 630) 31 002
-------- -------- -------- -------- -------- ------------ ------------ ------------ --------- ----------------- ---------
Loss for the
period - - - - - - - (6 794) (6 794) 147 (6 647)
Foreign currency
translation
differences - - - - - - (3 782) - (3 782) (1 654) (5 436)
Loss on cash
flow hedges - - - - (59) - - - (59) (20) (79)
-------- -------- -------- -------- -------- ------------ ------------ ------------ --------- ----------------- ---------
Total
comprehensive
loss for the
period - - - - (59) - (3 782) (6 794) (10 635) (1 527) (12 162)
-------- -------- -------- -------- -------- ------------ ------------ ------------ --------- ----------------- ---------
Contributions by
and
distributions to
owners
Issue of
ordinary shares 230 990 - - - - - - 1 220 - 1 220
Share issue
expense - - - - - - - - - - -
Share-based
payment
transactions - - - - - 640 - - 640 - 640
Share-based
payment
lapse/reversals - - - - - (130) - 130 - - -
Total
contributions
by and
distributions
to owners 230 990 - - - 510 - 130 1 860 - 1 860
-------- -------- -------- -------- -------- ------------ ------------ ------------ --------- ----------------- ---------
Balance at 31
December
2018
(Unaudited) 166 469 192 191 7 609 (1 614) 550 7 711 (41 788) (262 271) 68 857 (48 157) 20 700
-------- -------- -------- -------- -------- ------------ ------------ ------------ --------- ----------------- ---------
Consolidated Statement of Cash Flows
For the six months ended 31 December 2018
(Unaudited)
6 months 6 months
ended ended Year ended
31 December 31 December 30 June
2018 2017 2018
Unaudited Unaudited Audited
US$'000 US$'000 US$'000
Cash flows from operating activities
Loss before taxation (6 672) (10 319) (17 537)
Adjustments for:
Impairment charge 2 239 - -
Depreciation, amortisation
and impairment 5 644 11 222 13 158
Effect of foreign exchange
movements - - -
Equity-settled share-based
payments 640 1 464 1 888
Changes in provisions 145 60 (65)
Finance cost 5 385 6 427 11 021
Finance income (697) (67) (794)
Net cash flows from/(used)
in operating activities before
working capital changes 6 684 8 787 (7 671)
Increase in inventories (3 991) (3 186) (34)
Decrease/(increase) in trade
and other receivables 11 080 870 (10 421)
Decrease in trade and other
payables (3 003) (2 390) (3 822)
Net cash flows from/(used in)
operating activities 10 770 4 081 (6 606)
Cash flows used in investing
activities
Additions to property, plant
and equipment (724) (7 545) (1 977)
Net cash used in investing
activities (724) (7 545) (1 977)
Cash flows from financing activities
Proceeds from issue of ordinary
shares - 25 000 25 000
Share issue expense - (976) (900)
Increase in borrowings - 2 000 2 000
Repayment of borrowings (890) (8 125) (13 476)
Finance cost (1 793) (2 326) (3 421)
Finance income 287 67 307
Net cash (used in)/from financing
activities (2 396) 15 640 9 510
Net increase in cash and cash
equivalents 7 650 12 176 927
Cash and cash equivalents at
beginning of period 18 421 17 053 17 053
Exchange rate movement in cash
and cash equivalents at beginning
of period 159 459 441
------------ ------------ -----------
Cash and cash equivalents at
end of period 26 230 29 688 18 421
============ ============ ===========
Notes to the condensed Group interim financial statements
For the six months ended 31 December 2018
(Unaudited)
1. Accounting Policies
Basis of preparation
Firestone Diamonds plc (the "Company") is a company domiciled in the United Kingdom and is quoted on the AIM market of the London Stock Exchange. The unaudited condensed interim financial statements of the Company for the six months ended 31 December 2018 comprise the Company and its subsidiaries (together referred to as the "Group"). The Group is primarily involved in diamond mining and exploration in southern Africa. The audited consolidated financial statements of the Group for the year ended 30 June 2018 are available upon request from the Company's registered office at The Triangle, 5-17 Hammersmith Grove, London W6 0LG or at www.firestonediamonds.com.
Statement of compliance
These unaudited condensed interim financial statements of the Group for the six months ended 31 December 2018 have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board and as adopted for use in the European Union and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The same accounting policies, presentation and methods of computation are followed in these financial statements as were applied in the Group's latest audited financial statements for the year ended 30 June 2018.
These condensed interim financial statements have not been audited, do not include all of the information required for full annual financial statements, and should be read in conjunction with the Group's consolidated annual financial statements for the year ended 30 June 2018. The auditors' opinion on those statutory Annual Report and Accounts was unqualified. The auditor's report did not contain a statement under Section 498(2) or 498(3) of the Companies Act 2006.
The comparative figures presented are for the six months ended 31 December 2017 and the year ended 30 June 2018.
Going concern
The Directors have reviewed the Group's forecast cash flow and have considered the covenants in relation to the ABSA debt facility for a period of twelve months from signing these interim financial statements.
The operations are forecast to generate sufficient cash to fund the Group's operating costs and to repay the scheduled debt over the forecast period. Furthermore, the Directors do not expect, based upon the cash flow forecasts and actions within Management's control, that a covenant breach will be triggered. However, the headroom is not significant and the underlying assumptions are particularly volatile.
The Directors recognise that the covenants are based on certain forward-looking assumptions, including future diamond price, exchange rate - particularly between the South African Rand and the United States Dollar, and operating cost per tonne treated. Due to the nature of the forward-looking assumptions, there is a material possibility that under certain scenarios, covenants could be breached in the future. However, no covenant breach has occurred to date, and consequently no discussion has been held with the lender to date regarding what action may be taken by it in the event of a future covenant breach.
Having reviewed the cash flow forecast and considered the covenants, the Directors are confident that the Group will continue as a going concern for a period of at least twelve months from the date of approval of these interim financial statements.
On this basis, the Directors have concluded that it is appropriate to prepare the interim financial statements on a going concern basis. Notwithstanding this, the Directors, in accordance with Financial Reporting Council guidance in this area, conclude that at this time there is material uncertainty as to whether future covenants will be met and that failure to meet a future covenant may cast significant doubt upon the Group's ability to continue as a going concern and may therefore be unable to realise its assets and discharge its liabilities in the normal course of business. These interim financial statements do not include the adjustments that would result if the Group was unable to continue as a going concern.
2. Revenue
31 December 31 December 30 June
2018 2017 2018
Unaudited Unaudited Audited
US$'000 US$'000 US$'000
Diamond sales 27 382 25 990 62 246
------------ ------------ --------
3. Impairment
At the end of each reporting period the Group assesses whether there is an indication that an asset or cash-generating unit ("CGU") may be impaired. If an indication exists, the Group estimates the recoverable amount of the asset in order to determine if an impairment charge is required.
BK11 Mine
The sale of the BK11 Mine was subject to a conditional option agreement which expired on 18 December 2018. This was considered to be an external indicator of impairment. The Group has previously determined the recoverable amount of the BK11 mine based on its fair value less cost to sell. In the absence of a pending sale and considering the non-core nature of the asset to the Group, it has been fully impaired.
Liqhobong Mine
At the end of the period the recoverable amount of the Liqhobong CGU was determined using its value in use based on a discounted cash flow model. The carrying value was similar to the recoverable amount based on discounted cash flows over the remaining seven and a half year mine life (FY2018: eight year mine life) and the following key assumptions were used in the calculation:
Key assumptions
H1 2019 FY2018 Basis for assumption
--------------- ----------------- ------------ -----------------------------------------------------
Discount 11.3% 11.2% (2018: The discount rate used to account for the time
rate 9.2% real) value of money represents the pre--tax weighted
average cost of capital (WACC) that would be
expected by market participants based on risks
specific to the Liqhobong Mine. The rate included
adjustments for market risk, volatility and risks
specific to the asset.
Diamond price US$75 till US$82 The average diamond value is based on forward
(per carat) June 2020, looking assumptions of management based on available
US$80 thereafter market information pertaining to supply and demand
for Liqhobong's assortment.
Real diamond 1.5% 3% The diamond price growth is based on long-term
price growth diamond price projections.
Exchange R14.45 R13.73 The exchange rate is the spot rate as at the
rate (ZAR:US$) end of the period.
--------------- ----------------- ------------ -----------------------------------------------------
The sensitivity table below provides the potential impact on the carrying value of the Liqhobong CGU using various average diamond values:
CGU value Potential
US$'m (impairment)/
US$ per carat reversal
--------------------- --------- --------------
75 till June 2020, 85
thereafter 115.7 16.9
79 101.0 2.2
72 till June 2020, 77
thereafter 98.8 -
75 83.2 (15.6)
70 61.1 (37.7)
--------------------- --------- --------------
The value in use of the Liqhobong Mine is impacted mostly by changes in the average diamond value followed by changes in, particularly, the ZAR:US$ exchange rate.
Impairment summary
The following table presents current and previous impairments recorded against the Group's two CGUs:
Liqhobong BK11 Total
Cash-generating unit US$'000 US$'000 US$'000
------------------------------- --------- ------- ---------
Carrying value pre-impairment 221 420 5 218 226 638
Accumulated impairment (122 602) (5 218) (127 820)
------------------------------- --------- ------- ---------
Carrying value post-impairment 98 818 - 98 818
------------------------------- --------- ------- ---------
Group
---------------------
31 December 30 June
2018 2018
Unaudited Audited
Impairment charge US$'000 US$'000
------------------------------ ----------- --------
Property, plant and equipment 2 239 -
------------------------------ ----------- --------
4. Finance cost
31 December 31 December 30 June
2018 2017 2018
Unaudited Unaudited Audited
US$'000 US$'000 US$'000
Interest on borrowings 5 243 5 675 10 737
Unwinding of discount on rehabilitation
liability 142 155 284
Foreign exchange adjustments
on cash balances - 597 -
5 385 6 427 11 021
------------ ------------ --------
5. Taxation
31 December 31 December 30 June
2018 2017 2018
Unaudited Unaudited Audited
US$'000 US$'000 US$'000
Current tax - - (102)
Deferred tax credit 25 2 569 3 406
25 2 569 3 304
------------ ------------ --------
Factors affecting the tax charge for the year
The reasons for the difference between the actual tax charge and the standard rate of corporation tax of 19% (2017: 20%) in the United Kingdom applied to the loss for the year are as follows:
31 December 31 December 30 June
2018 2017 2018
Unaudited Unaudited Audited
US$'000 US$'000 US$'000
Loss before tax (6 672) (10 319) (17 537)
Tax on loss at standard rate of
19% (2017: 20.00%) 1 268 2 064 3 332
Adjustments to deferred tax not
recognised (4 146) 3 394 (2 432)
Effect of tax in foreign jurisdictions 3 184 (2 532) 2 840
Foreign exchange adjustment on
effective interest rate on borrowings (266) (290) (238)
Withholding tax credits relinquished - - (102)
Expenses not deductible for tax
purposes (15) (67) (96)
25 2 569 3 304
------------ ------------ ---------
6. Loss per share
31 December 31 December 30 June
2018 2017 2018
Unaudited Unaudited Audited
US$'000 US$'000 US$'000
Loss for the period (6 794) (7 180) (11 635)
Weighted average number of shares
used in basic loss per share
317 471
Opening balance 419 672 178 315 161 224 892
Effect of shares issued during 102 200
the Period 99 121 401 7 557 788 286
------------ ------------ -----------
419 672
Closing balance 518 793 579 322 719 012 178
------------ ------------ -----------
Dilutive effect of potential
ordinary shares - - -
Weighted average number of ordinary
shares in issue used in diluted 419 672
loss per share 518 793 579 322 719 012 178
------------ ------------ -----------
Basic and diluted loss per share
(US cents) (1.3) (2.2) (2.8)
Non-dilutive potential ordinary
share 89 974 198 88 415 347 86 401 656
------------ ------------ -----------
As a result of the loss for the current and previous period all potentially issuable shares are considered anti-dilutive. The Company has a further 24 872 440 (H1 2018: 23 313 589) potentially issuable shares in respect of share options issued to employees and 65 101 758 (H1 2018: 65 101 758) potentially issuable shares in respect of warrants issued to strategic investors as at 31 December 2018.
7. Property, Plant and Equipment
Property, plant and equipment decreased by US$11.9 million for the period. The decrease is as a result of US$5.6 million depreciation and amortisation charge, US$2.2 million impairment of the BK11 mine as discussed in note 3, the movement in the ZAR:US$ exchange rate resulting in a decrease in value in US dollar terms of US$4.8 million, offset by additions of US$0.7 million.
8. Deferred tax
The deferred tax included in the balance sheet is as follows:
31 December 31 December 30 June
2018 2017 2018
Unaudited Unaudited Audited
US$'000 US$'000 US$'000
Opening balance 6 501 3 761 3 761
Movement in temporary differences
recognised in income 25 2 569 3 406
Exchange differences (468) 297 (666)
6 058 6 627 6 501
------------ ------------ --------
The deferred tax asset/(liability) comprises:
31 December 31 December 30 June
2018 2017 2018
Unaudited Unaudited Audited
US$'000 US$'000 US$'000
Accelerated capital allowances (19 406) (25 777) (21 585)
Provisions 699 758 708
Borrowings (1 177) (1 527) (1 375)
Losses available for offsetting
against future taxable income 28 834 36 063 31 645
Temporary difference arising
on acquisition of subsidiary (2 892) (2 890) (2 892)
6 058 6 627 6 501
------------ ------------ ---------
The Directors considered the financial projections of Liqhobong and determined that there is compelling evidence to support a deferred tax asset that is based on the value of the taxable profit which is expected to be generated over the next three years. No deferred tax asset was raised for assessed losses remaining to be utilised after the three-year period and these losses do not have an expiry date.
Deferred tax assets and deferred tax liabilities relating to the same tax authorities have been disclosed as a net asset or liability.
The Group has unrecognised tax losses of approximately US$200.4 million (H1 2018: US$199.5 million), of which US$170.5 million relates to the Liqhobong Mine (H1 2018: US$152.2 million), US$17.9 million to the BK11 Mine (H1 2018: US$35.6 million) and US$12.0 million to the Group's corporate entities in the UK and South Africa (H1 2018: US$11.7 million).
9. Inventories
31 December 31 December 30 June
2018 2017 2018
Unaudited Unaudited Audited
US$'000 US$'000 US$'000
Diamond inventory 6 560 6 883 2 898
Spares and consumables 3 164 3 078 2 983
9 724 9 961 5 881
------------ ------------ --------
10. Share capital
Number of Shares Nominal value of shares
31 December 31 December 30 June 31 December 31 December 30 June
2018 2017 2018 2018 2017 2018
Unaudited Unaudited Audited Unaudited Unaudited Audited
'000 '000 '000 US$'000 US$'000 US$'000
Allotted, called
up and fully paid
Ordinary shares
Opening balance 515 678 317 472 317 472 6 272 3 590 3 590
Issued during the
period 17 507 187 642 198 206 230 2 537 2 682
------------ ------------ --------- ------------ ------------ ----------
Closing balance 533 185 505 114 515 678 6 502 6 127 6 272
7 388
Deferred shares 7 388 642 7 388 642 642 159 967 159 967 159 967
7 904
TOTAL 7 921 827 7 893 756 320 166 469 166 094 166 239
------------ ------------ --------- ------------ ------------ ----------
During the period, the Company issued a further 17 507 484 new ordinary shares of 1 pence each was in respect of the quarterly interest due on the Series A Eurobonds.
11. Borrowings
ABSA Series Series
31 December 2018 debt A B Other
US$'000 facility Eurobonds Eurobonds loans Total
---------------------------------- ---------- ----------- ----------- ------- ---------
Capital amount
At 1 July 67 790 30 000 7 528 1 216 106 534
Foreign exchange adjustments - - - (55) (55)
Interest capitalised - - 286 - 286
Capital repayments - - - (35) (35)
---------------------------------- ---------- ----------- ----------- ------- ---------
At 31 December 67 790 30 000 7 814 1 126 106 730
---------------------------------- ---------- ----------- ----------- ------- ---------
Finance cost to be amortised
over the life of the instrument
At 1 July (4 669) (5 299) (198) - (10 166)
Payment of capitalised finance
cost (855) - - - (855)
Additions (447) - - - (447)
Finance cost 1 265 647 50 - 1 962
---------------------------------- ---------- ----------- ----------- ------- ---------
At 31 December (4 706) (4 652) (148) - (9 506)
---------------------------------- ---------- ----------- ----------- ------- ---------
Total at amortised cost
Non-current liabilities 56 731 25 348 7 666 851 90 596
Current liabilities 6 353 - - 275 6 628
---------------------------------- ---------- ----------- ----------- ------- ---------
Total 63 084 25 348 7 666 1 126 97 224
---------------------------------- ---------- ----------- ----------- ------- ---------
ABSA Series Series
30 June 2018 debt A B Other
US$'000 facility Eurobonds Eurobonds Loans Total
------------------------------------- ------------ ----------- ----------- ------- ---------
Capital amount
At 1 January 73 006 30 000 7 247 1 492 111 745
Finance cost capitalised - - 281 - 281
Foreign exchange adjustments - - - (141) (141)
Capital repayments (5 216) - - (135) (5 351)
------------------------------------- ------------ ----------- ----------- ------- ---------
At 30 June 67 790 30 000 7 528 1 216 106 534
------------------------------------- ------------ ----------- ----------- ------- ---------
Finance cost to be amortised
over the life of the instrument
At 1 January (6 108) (5 936) (247) - (12 291)
Finance cost capitalised 855 - - - 855
Additions (617) - - - (617)
Finance cost 1 201 637 49 - 1 887
------------------------------------- ------------ ----------- ----------- ------- ---------
At 30 June (4 669) (5 299) (198) - (10 166)
------------------------------------- ------------ ----------- ----------- ------- ---------
Total at amortised cost
Non-current liabilities 61 251 24 701 7 330 943 94 225
Current liabilities 1 870 - - 273 2 143
------------------------------------- ------------ ----------- ----------- ------- ---------
Total 63 121 24 701 7 330 1 216 96 368
------------------------------------- ------------ ----------- ----------- ------- ---------
12. Commitments and contingent liabilities
The Group had no capital commitments or contingent liabilities as at 31 December 2018.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
IR QDLFLKXFLBBX
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March 28, 2019 03:00 ET (07:00 GMT)
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