Firestone sales over 132K carats in Q2
Firestone Diamonds provides its quarterly update on operations at its Liqhobong Diamond Mine for the quarter ended 31 December 2019 or say Q2, FY 2020.
Diamond recoveries remained of 138K carats against the Q1 of over 201K carats. Overall result says that two sales took place during the quarter at which 132 885 carats were sold while Q1 sales had of 168 612 carats, realising revenue of US$9.7 million over the revenue of Q1 of US$10.6 million at an average value of US$73 per carat against Q1 of US$63 per carat.
Due to the power disruption and a subsequent review of the mine plan, the production guidance for FY2020 has been revised as: Diamond recoveries of between 720 000 and 750 000 carats (previously between 820 000 and 870 000 carats).
Paul Bosma, Chief Executive Officer, commented: "The unexpected power disruption had a devastating impact on production and revenue generation. The team however, did well to salvage the situation by procuring and installing generators from South Africa in record time to allow for operations to recommence.
As a result of the power disruption, we have reduced our guidance for the year in respect of diamond recoveries and ore tonnes treated.
During the quarter, good progress was made with our Lenders and non-binding term sheets were signed before year end with ABSA bank for a debt repayment standstill until 31 March 2021 and with our bondholders for a working capital facility of US$6 million for the same period. We expect both of these agreements to be formally documented before our financial year-end.
Due to the production setback and continued lacklustre market conditions, the Board has decided that it is imperative that it does all it can to reduce costs in order to survive the prolonged downturn. As announced earlier today, this includes delisting from AIM and reducing the size of the Board."
Diamond Sales and Market Outlook:
During the quarter, sales volumes decreased by 21% due to the power disruption to 132 885 carats compared to 168 612 carats sold in the previous quarter.
However, average diamond values of US$73 per carat were higher than US$63 per carat in the previous quarter due to a number of larger and better-quality diamonds that were recovered and sold including one plus 100 carat diamond and two plus 90 carat diamonds.
As a result, the sales value for the quarter of US$9.7 million was only 8% lower than US$10.6 million in the previous quarter. The prices realised for the smaller goods that make up the bulk of our production by volume, remain subdued, impacted by a build-up of rough and polished inventory in the midstream.
Initial indications are that the peak retail season at the end of the 2019 was satisfactory and therefore, it is anticipated that some restocking should take place during early 2020. However, due to the excess inventory held in the midstream and by the two largest producers, we expect that it will take some time for the value chain to rebalance and for there to be a sustained increase in prices.
Other downside risks include ongoing US-China trade tensions and more recently the uncertain impact of the coronavirus on demand.
