Interim Results
for the Six Months Ended 31 December 2009
African
DIAMONDS PLC
2
Interim Results for the Six Months Ended 31st December 2009
This is a very interesting and positive time for the shareholders of African Diamonds.
The
pace of the AK6 development is accelerating.
We expect the mine to come on stream in
the last quarter of 2011.
The final feasibility study will be completed in late May, and site
development will start by September 2010.
The indications on OPEX, CAPEX and
revenue are in line with what has previously been reported.
Among the positive indications are:
• the per carat value of AK6 diamonds is expected to be in the region of $200 a carat
compared to the $138 used in existing studies;
• throughput in Phase 1 of up to 3 million tonnes instead of 2 million tonnes;
• a change in the sieve size from 1 mm to 1.5 mm, thereby decreasing the flow to the
final diamonds recovery, but increasing the average size of diamonds recovered;
• increasing the size of material which escapes crushing.
This enables diamonds up to
350 carats be recovered.
This is critical to recover large Type II diamonds.
Add to this a rapid improvement in world diamond demand and prices, and the future looks
bright.
Your directors are at an advanced stage in completing financing to cover expenditure in
2010 and 2011.
We are particularly mindful of equity dilution given our low share price.
African Diamonds has the right to market their percentage of AK6 output; up to 400,000
carats of good quality diamonds at full production.
In a market of growing scarcity, this is
a valuable asset and is helping in our funding.
The feasibility study is progressing as planned.
Following a detailed assessment of the ore
types and equipment, the plant flowsheet has been restructured.
Three significant
changes were proposed and accepted by the board of Boteti.
The first is that the
Autogenous Mill will treat between 2.5-3.0 million tonnes of ore per annum as opposed to
the originally specified 2 million tonnes per annum and this at no additional cost.
Second,
the bottom cut-off size for the plant has been elevated from 1.0 mm to 1.5 mm.
Not only
will this increase the dollars/hour revenue generated through the plant, but it will also lead
to a lower per tonne plant operating cost.
Finally, the top cut off size has been increased
from 24mm to 32mm so as to capture the large, high quality diamonds which are known
to be prevalent in the AK6 kimberlite.
The average diamond value (+1mm) has improved to a modelled $162/carat, but when in
production this is expected to be in the range of $200/carat.
More recent studies have
African Diamonds plc Interim Results
3
looked at detailed modelling of the diamond size frequency distribution.
This suggests
values in excess of $200/carat once the diamond breakage which was so prevalent in the
drill sampling has been modelled out.
There is also an emerging view that the grade of the
southern lobe could be as much as 40% under-estimated again due to the high-level of
diamond breakage in the drill samples taken from the southern lobe.
There is a high ratio of Type II diamonds in AK6.
These are very rare, maybe 2% of all
diamonds.
They contain no nitrogen and tend to be large.
They command very high prices.
Some experts believe that the proportion of Type II stones in AK6 may be larger than
previously estimated.
We have reconfigured the treatment plant to allow for the recovery
of these stones.
Their presence could have a very favourable impact on revenue.
Aside from technical and economic activity, the project team has been working on
stakeholder engagement in the vicinity of the AK6 site.
All the assets belonging to the
previous operator have also now been transferred to the new joint venture.
Office space
has been taken at Gaborone"s Diamond Technology Park, which will also be used as a
venue to sort the AK6 diamonds.
We are currently in discussion with a number of
diamantaires on the best diamond marketing regime.
The world recession, while hurting many, is a boon to the AK6 development.
Equipment
prices have stabilised or fallen, delivery times shortened and skills are available.
These
facts help CAPEX and OPEX, both of which are expected to be within the parameters of
our earlier studies.
While the focus is clearly on AK6, other opportunities are not being neglected.
We are
considering joint venture proposals on two other Botswana kimberlites in our portfolio.
We
hope to begin detailed exploration of a third kimberlite and we are developing ideas on
how to expand our Botswana presence.
John Teeling
Chairman
18th March 2010
African Diamonds plc Interim Results
Condensed Consolidated Income Statement Six Months Ended Year Ended
31 Dec 09 31 Dec 08 30 Jun 09
unaudited unaudited audited
£"000 £"000 £"000
Revenue - - -
Cost of sales - - -
------ ------ ------
Gross Profit - - -
Administrative costs (223) (335) (601)
------ ------ ------
Operating Loss (223) (335) (601)
Finance revenue 1 37 93
Finance costs (2) (2) (2)
Profit/(Loss) on investment held at fair value 19 (475) (550)
------ ------ ------
Loss before taxation (205) (775) (1,060)
Income tax expense - - -
------ ------ ------
Loss for the period (205) (775) (1,060)
------------ ------------ ------------
Loss per share (0.27p) (1.02p) (1.39p)
------------ ------------ ------------
Condensed Consolidated Balance Sheet 31 Dec 09 31 Dec 08 30 Jun 09
unaudited unaudited audited
£"000 £"000 £"000
Non Current Assets
Intangible assets 3,866 3,137 3,511
Financial assets 227 282 208
Investments 838 838 838
Receivables (due after one year) 1,802 1,342 1,802
------ ------ ------
6,733 5,599 6,359
Current Assets
Receivables and prepayments 46 34 24
Cash and cash equivalents 695 991 53
------ ------ ------
741 1,025 77
------ ------ ------
Total Assets 7,474 6,624 6,436
------ ------ ------
Liabilities
Current Liabilities
Trade and other payables (235) (181) (245)
------ ------ ------
Net Current Liabilities 506 844 (168)
------ ------ ------
Non Current Liabilities
Loan Lucara Diamonds (1,233) - -
------ ------ ------
Net Assets 6,006 6,443 6,191
------------ ------------ ------------
Equity
Share capital 2,927 2,927 2,927
Reserves 3,079 3,516 3,264
------ ------ ------
Total Equity 6,006 6,443 6,191
------------ ------------ ------------
African Diamonds plc Financial Information (unaudited)
4
5
African Diamonds plc Financial Information (unaudited)
Condensed Consolidated Statement of Changes in Shareholders Equity
Share based
Share Share Payment Translation Retained Total
Capital Premium Reserves Reserves Losses Equity
£"000 £"000 £"000 £"000 £"000 £"000
As at 1 July 2008 762 2,165 663 - 3,628 7,218
Share based payments - - -- - - -
Loss for the period - - - - (775) (775)
------ ------ ------ ------ ------ ------
As at 31 December 2008 762 2,165 663 - 2,853 6,443
------ ------ ------ ------ ------ ------
Share based payments - - 13 - - 13
Profit/(Loss) for the period - - - 20 (285) (265)
------ ------ ------ ------ ------ ------
As at 30 June 2009 762 2,165 676 20 2,568 6,191
------ ------ ------ ------ ------ ------
Share based payments - - - - - -
Profit/(Loss) for the period - - - 20 (205) (185)
------ ------ ------ ------ ------ ------
As at 31 December 2009 762 2,165 676 40 2,363 6,006
------------ ------------ ------------ ------------ ------------ ------------
Condensed Consolidated Cash Flow Six Months Ended Year Ended
31 Dec 09 31 Dec 08 30 Jun 09
unaudited unaudited audited
£"000 £"000 £"000
Cash Flows from Operating Activities
Loss before tax (205) (775) (1,060)
Finance cost 2 2 2
Finance revenue (1) (37) (93)
Exchange movement 21 (27) (4)
Fair value on investments (19) 475 550
------ ------ ------
Cash used by Operations (202) (362) (605)
Increase in trade and other payables 1,223 101 174
(Increase)/Decrease in receivables (22) 40 49
------ ------ ------
Net cash used in operating activities 999 (221) (382)
Finance revenue 1 37 93
Finance costs (2) (2) (2)
------ ------ ------
Net Cash used in Operating Activities 998 (186) (291)
------ ------ ------
Cash Flow from Investing Activities
Payment for intangible assets (355) (434) (796)
Movement in long term receivables - (1,342) (1,802)
------ ------ ------
Net Cash used in Investing Activities (355) (1,776) (2,598)
------ ------ ------
Cash Flow from Financing Activities
Proceeds from issue of equity shares - - -
------ ------ ------
Net Increase in Cash and Cash Equivalents 643 (1,962) (2,889)
Cash and Cash Equivalents at beginning of the period 53 2,926 2,926
Effect of exchange rate changes on cash held in foreign currencies (1) 27 16
------ ------ ------
Cash and Cash Equivalents at end of the period 695 991 53
------------ ------------ ------------
African Diamonds plc Financial Information (unaudited)
6
Notes:
1.
Information
The financial information for the six months ended December 31st, 2009 and the comparative amounts for
the six months ended December 31st, 2008 are unaudited.
The financial information above does not
constitute full statutory accounts within the meaning of section 240 of the Companies Act 1985.
The Interim Financial Report has been prepared in accordance with IAS 34 Interim Financial Reporting as
adopted by the European Union.
The accounting policies and methods of computation used in the
preparation of the Interim Financial Report are consistent with those used in the Group 2009 Annual Report,
which is available at www.afdiamonds.com
2.
No dividend is proposed in respect of the period.
3.
Loss per share
Basic loss per share is computed by dividing the loss after taxation for the year available to ordinary
shareholders by the weighted average number of ordinary shares in issue and ranking for dividend during the
year.
Diluted loss per share is computed by dividing the loss after taxation for the year by the weighted average
number of ordinary shares is issue, adjusted for the effect of all dilutive potential ordinary shares that were
outstanding during the year.
The following table sets forth the computation for basic and diluted earnings per share (EPS):
31 Dec 09 31 Dec 08 30 Jun 09
£"000 £"000 £"000
Numerator
For basic and diluted EPS retained loss (204,863) (775,200) (1,059,875)
-------------------- -------------------- --------------------
Denominator
For basic and diluted EPS 76,210,766 76,210,766 76,210,766
-------------------- -------------------- --------------------
Basic and diluted EPS (0.27p) (1.02p) (1.39p)
-------------------- -------------------- --------------------
The following potential ordinary shares are anti-dilutive and therefore excluded from the weighted average
number of shares for the purposes of the diluted earnings per share.
31 Dec 09 31 Dec 08 30 Jun 09
£"000 £"000 £"000
Share options 3,400 3,400 3,400
-------------------- -------------------- --------------------
4.
Profit/(loss) on investment held at fair value
31 Dec 09 31 Dec 08 30 Jun 09
£"000 £"000 £"000
Fair value profit/(loss) on financial asset 19 (475) (550)
-------------------- -------------------- --------------------
Profit or losses arise from the subsequent measurement of financial assets at fair value through the profit
and loss account in relation to the group"s interest in Stellar Diamonds Plc (formerly West African Diamonds
Plc.)
7
African Diamonds plc Financial Information (unaudited)
5.
Intangible Assets
31 Dec 09 31 Dec 08 30 Jun 09
£"000 £"000 £"000
Exploration and evaluation assets:
Cost
Opening balance 3,511 2,703 2,703
Additions 355 434 808
---------- ---------- ----------
Closing balance 3,866 3,137 3,511
-------------------- -------------------- --------------------
Exploration and evaluation assets relates to expenditure incurred in mineral exploration in Botswana.
The directors are aware that by its nature there is an inherent uncertainty in exploration and evaluation, and
therefore inherent uncertainty in relation to the carrying value of capitalised exploration and evaluation
assets.
The realisation of these intangible assets is dependent on the successful discovery and development of
economic resources, and is subject to a number of significant potential risks including;
• Price fluctuations;
• Foreign exchange rates;
• Uncertainties over development and operational costs;
• Political and legal risks, including arrangements with governments for licences, profit sharing and
taxation;
• Currency exchange fluctuations and restrictions; and
• Foreign investment risks including increases in taxes, royalties and renegotiation of contracts;
Should these prove unsuccessful the value included in the balance sheet would be written off to the income
statement.
Having reviewed the exploration and evaluation expenditure at 31 December 2009, the directors are satisfied
that the value of the intangible asset is not less than carrying value.
This is supported by the fact that on
November 11th 2009, Lucara Diamond Corp, a company based on the Toronto Venture Exchange, acquired
a 71% share in the AK6 diamond project from De Beers.
In addition, Lucara Diamond Corp have given
African Diamond plc a US$2m loan to fund 40% of the cost of a feasibility study in respect of AK6 and for
working capital purposes.
Included in the exploration and evaluation assets are amounts of £124,563 (Jun 09: £184,146) of wages and
salaries and £Nil (Jun 09: £12,600) relating to equity-settled share based payment transactions during the
period.
6.
Financial Assets
Financial assets carried at fair value through profit or loss (FVTPL):
31 Dec 09 31 Dec 08 30 Jun 09
£"000 £"000 £"000
Non-derivative financial assets designated as at FVTPL 194 250 175
-------------------- -------------------- --------------------
The company purchased 5,000,000 shares (£1,000,000) in West African Diamonds plc in January 2007.
At
the period end this investment represented 5.56% of the issued share capital of West African Diamonds plc.
On 22nd February 2010 West African Diamonds plc merged with Stellar Diamonds Limited and the enlarged
entity was renamed Stellar Diamonds plc.
African Diamonds plc now holds 1% of the enlarged entity.
7.
Non Current Liabilities
31 Dec 09 31 Dec 08 30 Jun 09
£"000 £"000 £"000
Loan Lucara Diamond Corp 1,233 - -
-------------------- -------------------- --------------------
On November 11th 2009, Lucara Diamond Corp, a company based on the Toronto Venture Exchange,
acquired a 71% share in the AK6 diamond project from De Beers.
Lucara Diamond Corp have given African
Diamond plc a US$2m loan to fund 40% of the cost of a feasibility study in respect of AK6 and for working
capital purposes.
8.
The Interim Report for the six months to December 31st, 2009 was approved by the Directors on
18th March 2010.
9.
Copies of this announcement will be sent to shareholders and will be available for inspection at the
Companies Registered Office at 20-22 Bedford Row, London WC1R 4JS.
The Interim Report may also be
viewed at African Diamonds plc"s website at www.afdiamonds.com
African Diamonds plc Financial Information (unaudited)
African Diamonds plc
Registered Office
20-22 Bedford Row
London WC1R 4JS
UK
www.afdiamonds.com
Registrars & Transfer Office
Computershare Services plc
Heron House
Corrig Road
Sandyford Industrial Estate
Dublin 18
T: +353 1 216 3100
F: +353 1 216 3150
