Firestone Diamonds FY revenues rise 22%, talks over Jwaneng plant and kimberlites development in Orapa ongoing

South Africa and Botswana operating diamond miner Firestone Diamonds (AIM: FDI) reported higher revenues for the full year, which saw a number of operational successes, and said it would now concentrate on developing a mining operation on the BK11 kimberlite and finalizing the contract with Debswana for the design, construction and operation of a tailings plant at the Jwaneng mine.

Revenues for the year ended 30 June amounted to £4 million, marking a 22% year on year increase, while operating profit narrowed to £0.7 million from last year’s £2.1 million. Pre-tax losses amounted to £10.55 million after impairment charges of £11.2 related to Firestone’s South African alluvial assets.

The financial performance was impacted by the changes in diamond prices, which reached record highs in the first half of the previous year, but declined 50% in the final quarter of 2008, while wholesale prices dropped 20%.

However, Firestone Diamonds said that the long term prospects for diamonds were positive as the price declines have prompted major producers like De Beers, Debswana and Alrosa to cut production and will likely result in a 35% decline in supplies 2009, driving the prices back up. Shortfalls in supply have already caused a 30% increase in diamond prices since their recent lows.

The most significant operational results included the confirmation of the significant economic potential of the Orapa area in Botswana. The high grade areas identified at BK11 could produce revenues of US$20 million per annum and operating margins in excess of 50%. Firestone said contract negotiations with Debswana over the construction and operation of a tailings plant at the Jwaneng Mine in Botswana were at an advanced stage and were now expected to be concluded in Q1 2010 instead of Q4 2009. Initial production of 2 million tonnes per annum is targeted to commence at the Jwaneng project in 2011.

While obtaining good results from bulk sampling carried out at its 100% owned Tsabong project, the company said it would now focus on developing a new mining operation at BK11 and concluding Jwaneng tailings contract next year, also being in negotiations for new kimberlites in the Orapa area, where it already has five, and a significant new toll treatment project.

Having raised £7.2 million in July 2009 on top of the £5 million raised a year ago, the company said it was well funded and confident about its prospects in Botswana.

The BK 11 kimberlite is located 7 kilometres north-west and 20 kilometres south-east of De Beers’ Letlhakane and Orapa mines respectively. A sample of 135 tonnes of kimberlite produced a sample grade of 10 cpht (carats per hundred tones) and a modeled grade of 15 cpht. BK11 contains a total 17 million tones of kimberlite material. Phase 2 evaluation is currently underway and is expected to provide sufficient data to define an inferred resource.

BK11, in which Firestone owns an 80% interest, is expected to be brought into production in mid 2010.

Shares in Firestone added 5.6% on the news this morning.