Stellar Diamonds PLC (LON:STEL) said it is “extremely pleased” with the progress made during the full year to end June 2011 and remains on track to produce a maiden JORC compliant independent resource estimate for the Droujba and Tongo kimberlites in the first quarter of 2012.
Although the current market environment is characterised by volatility and risk aversion, Stellar is well capitalised to progress with work programmes, with cash of of US$6.5 million as at June 30 2011, and no debt.
Stellar is focused on West Africa where programmes aimed at generating maiden resource estimates at Droujba in Guinea and Tongo in Sierra Leone are ongoing. Bulk sampling of the Lion-5 dyke at Kono in Sierra Leone is due to commence shortly and at Bouro in Guinea a previous bulk sample realized a grade of 243 carat per hundred tonnes. Mining at Mandala in Guinea is currently on a seasonal break.
The group incurred a full-year operating loss of US$6.25 million before an impairment charge of US$8.6 million, compared with US$5.40 million a year earlier. The operating loss is in line with company expectations given the stage of development.
The impairment charge is an accounting item resulting from the board's decision to cease mining at Bomboko and the reduced estimate of commercially minable resource at Mandala.
Chief executive Karl Smithson said: “We are extremely pleased with the progress made during the financial period and the subsequent months. The decision to refocus our resources on our core kimberlite projects has proved to be successful, with strong results achieved at both our Droujba and Tongo projects as we have sought to considerably accelerate the pace of work at both these projects.
“Drilling at both projects has revealed very encouraging results and we are confident in our ability to create further value and momentum from these projects. We are expecting a maiden resource for both projects in the first quarter of 2012, and this will be a major milestone for Stellar as we look to create significant value from our portfolio of diamond projects."
The diamond market has been very strong for most of the year under review with many companies reporting record prices for rough diamonds, the company said.
Whilst the longer term pricing outlook remains very bullish, the recent economic volatility and worries about sovereign and bank debt have resulted in a weakening of rough and polished diamond prices from these record highs.
However, there is still very strong diamond demand in India and China which are the main growth areas and Stellar expects this to continue. “Therefore, we still believe that although there will be periods of price weakness, as currently being experienced, the longer term trend for diamond prices will be upwards driven by strong consumer demand and lack of new production,” it added.