In the media

DiamondCorp releases final year results for 2007

04 March 2008

Source: Mineweb

DiamondCorp plc (AIM:DCP), the South African diamond mine development and exploration company, releases its audited results for the period ended 31 December 2007.

Highlights for 2007

  • Completion of a 1.6 million tonne per annum dense media separation plant and commissioning of Phase One tailings retreatment operation at the Lace mine in the Free State Province of South Africa.
  • Total diamond recoveries of 25,266 carats, of which 15,976 carats were produced post-commissioning of the processing plant.
  • Diamond quality exceeds management's expectations, including a significant proportion of fancy coloured stones.
  • Initial revenue of £74,795 from 4,454 carats of diamonds sold late in the year. Gross loss on this production was £114,608 which is not representative of steady state production, but was due to operational problems related to South African power outages, weather-related processing problems and an extended mechanical breakdown in the recrush circuit.
  • Net Loss for the year was £2,101,251, including non-cash items of £790,329 (net £1,310,922). The loss included some one off charges associated with the Company's IPO.
  • Accelerated development plan formulated to bring Phase Two underground mining into production in the second half of 2008, more than 12 months ahead of schedule.
  • Snowden Mining Industry Consultants Pty Ltd completed a Scoping Study on the accelerated development plan which validated management's proposal.

Post Period Highlights

  • Most of the operational issues which hampered production late in 2007 have largely been overcome and February was a record month in terms of tailings throughput.
  • Management worked with Investec Bank Limited on an inward listing of the Company's shares on the main board of the JSE Limited which is expected to be completed in March.

Chairman's Statement

I am pleased to say that 2007 was the year that your Company joined the ranks of diamond producers as its 74% owned South African subsidiary began recovering gems from the Lace Mine tailings dumps. The last time that Lace produced diamonds was in 1931. It is also gratifying to report our first revenues from the sales of diamonds in the second half of the year.

At the end of September we commissioned the 1.6 million tonne per annum dense media separation plant at Lace, near Kroonstad, some 200km southwest of Johannesburg. During the commissioning process and the three months following commissioning, 320,045 tonnes of tailings were treated for the recovery of 25,266 carats of diamonds including a 17.72 carat stone and a 13.81 carat stone.

It was exciting to recover these large stones in material that had been treated previously and perhaps even more thrilling to recover a significant proportion of fancy yellow stones, numerous vivid purples and one small intense blue diamond. A large proportion of stones recovered have been of gem quality and prices received from our three tenders at the Johannesburg Diamond Bourse have been in line with expectations. These results all give us an insight into what we can expect when we start underground mining in Phase Two of the Lace mine re-development.

An underground ramp is well advanced towards the primary kimberlite and we are on target to take a bulk sample from there in the third quarter of this year and subject to receiving all the necessary permits, we will then start treating ore from underground before the end of the year. With the addition of crushing capacity, this ore will be treated through the existing plant in a batch sequence with the tailings. Phase Two of operations at Lace will then have been brought forward by 12 months.

It would be wrong for me to paint too bright a picture of progress in 2007 and plans for this year, as there have been commissioning problems with the plant, while particularly high rainfall has hampered the movement of tailings and in particular power cuts by Eskom have caused lost production. We believe that we have now resolved problems with the crusher and have agreed with Eskom to access a new source of power for Lace from the dedicated power line supplying the nearby Voorspoed Diamond Mine being developed by De Beers. This supply should come on line within the next six months and will provide Lace with all the power it requires for the Phase Two underground operation. In the short term, Lace is still at the mercy of Eskom and South Africa's power problems but by mid year we should have access to two separate electricity supplies from different areas of the Free State.

The problems in 2007 which seriously impacted the mining rate and diamond recoveries combined with the extended mechanical failure of the crusher resulted in the Group incurring a Gross Loss of £114,608 for the year. Net Loss for the year was £2,101,251, including all non-cash items from the operating section of the consolidated cash flow statement with the exception of working capital movements in receivables, inventories and payables of £1,075,175 (net £981,076). This loss also included some one off charges associated with the Company's IPO and is not representative of steady state production.

Having established the tailings operation, Alistair Holmes, Managing Director of Lace Diamond Mines who had been with us from the start and was a great source of knowledge on the local diamond mining industry retired to Australia. We are very grateful to him for bringing the Lace opportunity to us and bringing the project to fruition. I am pleased to report that Paul Sharples who joined us in July has taken up where Alistair left off and is doing an excellent job under testing conditions. Employees at Lace now total over 100, we are well established in the community and are fully compliant with South Africa's Black Economic Empowerment regulationst.

In my report last year, I talked about the Directors seeking a dual listing for the Company's shares on the AltX market of the Johannesburg Stock Exchange (JSE). However, with further investigation, we were advised that better visibility and marketability could be obtained by a full listing on the JSE and we appointed Investec to process our application. This should be completed in the next few weeks. After that and when market conditions improve, we are likely to issue a tranche of new shares to South African investors to enhance liquidity and provide capex for underground mine development and a milling circuit in the processing plant.

We are continually seeking opportunities to build your Company and in August, entered an option Agreement to acquire the private diamond mining Group Sonop which is the largest privately owned diamond producer in South Africa. This would have been a significant move by your Company. As you know, our shares were suspended on AIM since it was viewed as a reverse takeover. In the event, Sonop's new operations on the Middle Orange River failed to reach the conditions that we set in our Agreement and we decided not to proceed with the acquisition.

Management completed reviews and due diligence on a number of other potential diamond projects in southern Africa including acquisitions and joint ventures. None of these have currently met the Company's targets for scalability or profitability and we will not build DiamondCorp on projects which do not add value. We continue to evaluate all opportunities.

Our focus to date has been on bringing the Lace mine into production but the Company also has a number of diamond exploration targets in our current lease area which we will begin to review when free cash flow is available from operations.

I would like to thank all our management and employees for successfully bringing the Lace mine back into production after so many years. Their hard work puts the Company in a strong position for an exciting future.

Euan Worthington
29 February 2008


Diamondcorp plc
Paul Loudon
Managing Director and CEO
020 7256 2651

Cenkos Securities plc
Joe Nally/Ivonne Cantu
020 7397 8900

Investec Bank Limited
Robert Smith/Cindy Stoutjesdyk
+27 11 286 7662

Conduit PR
Jane Stacey/Arabella Hobbs
020 7429 6606/+44 792 292 3306

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