Firestone Diamonds (LON:FDI)

Firestone Diamonds (LON:FDI)


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Firestone Diamonds RNS Release

Unaudited results for six months to 31 Dec 2018


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);

·     EBITDA1 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 million2); 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:

 

Firestone Diamonds plc

+44 (0)20 8741 7810

Paul Bosma

 

Grant Ferriman

 

 

 

Macquarie Capital (Europe) Limited (Nomad and Broker)

+44(0)20 3037 2000

Nick Stamp

 

Nicholas Harland

 

 

 

Tavistock (Public and Investor Relations)

+44 (0)20 7920 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 PERIOD ENDING 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

Ore (tonnes)

1 896 575

1 907 795

3 802 568

Waste (tonnes)

1 863 164

1 488 073

2 910 636

Total (tonnes)

3 759 739

3 395 868

6 713 204

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 ended


6 months ended


Year ended



31 December 2018


31 December 2017


30 June 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 2018


31 December 2017


30 June 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 capital

Share premium

Warrant reserve

Merger reserve

Hedging Reserve

Share-based payment reserve

Translation reserve

Accumulated losses

Total

Non-con-trolling interest

Total 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 ended


6 months ended


Year ended



31 December 2018


31 December 2017


30 June 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 2018


31 December 2017


30 June 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 rate


11.3%


11.2% (2018: 9.2% real)



Diamond price (per carat)


US$75 till June 2020, US$80 thereafter


US$82



Real diamond price growth


1.5%


3%



Exchange rate (ZAR:US$)


R14.45


R13.73



The exchange rate is the spot rate as at the 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:

US$ per carat

CGU value US$'m

Potential (impairment)/ 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 2018

Unaudited

30 June

2018

Audited

Impairment charge

US$'000

US$'000

Property, plant and equipment

2 239

-

 

4.         Finance cost



31 December 2018


31 December 2017


30 June 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 2018


31 December 2017


30 June 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 2018


31 December 2017


30 June 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 2018


31 December 2017


30 June 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







Opening balance


419 672 178


315 161 224


317 471 892

Effect of shares issued during the Period


99 121 401


7 557 788


102 200 286

Closing balance


518 793 579


322 719 012


419 672 178








Dilutive effect of potential ordinary shares


-


-


-

Weighted average number of ordinary shares in issue used in diluted loss per share


518 793 579


322 719 012


419 672 178








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 2018


31 December 2017


30 June

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 2018


31 December 2017


30 June

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 2018


31 December 2017


30 June 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 2018

31 December 2017

30 June 2018

31 December 2018

31 December 2017

30 June 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








Deferred shares

7 388 642

7 388 642

7 388 642

159 967

159 967

159 967








TOTAL

7 921 827

7 893 756

7 904 320

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

31 December 2018

US$'000

ABSA
debt facility

Series A
Eurobonds

Series B
Eurobonds

Other 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

 

 

 

 

 

 

30 June 2018

US$'000

ABSA
debt facility

Series A
Eurobonds

Series B
Eurobonds

Other 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.

 


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