Firestone Diamonds completes diamond sales amid tough market

The AIM-traded firm said that at the sales, a total of 195,330 carats were sold including another stone worth more than $1m.

Average values stood at $69 per carat, and total sale proceeds were $13.5m.

“Since commencement of production in 2016, the company has sold all 505,706 carats recovered, for $41.3m, at an average value of $82/ct,” Firestone’s board said in its statement.

“The July and September 2017 diamond sales saw all 195,330 carats offered for sale sold for $13.5m, which included the company's second >$1m stone, achieving an average value of $69/ct.”

Firestone said that average realised value per carat represented the “continued lower-than-expected occurrence” of larger, better quality diamonds and a subdued market, as it experienced in the previous quarter.

The board said it believed that it was due to two factors - the overall market environment, and the lower-than-expected occurrence of larger and better quality diamonds at Liqhobong.

“From an operational perspective, the Company continues to treat ore at nameplate capacity, and is recovering the anticipated reserve grades within operating cost expectations.”

The board said it anticipated an improvement in the occurrence of higher quality diamonds as the higher grade kimberlite areas were mined and treated.

Management said it was continuing to analyse the variability in average diamond values that it experienced to date, which saw the average values achieved range from $107/ct to $69/ct.

“In the board's view, this is not an uncommon situation in the early production stages of a new mine, and - in Liqhobong's case - the board believes that the company's true value proposition will become clearer as more representative volumes of all the ore facies are mined and treated.”

Firestone added it continued to work with its consultants in regards to finalising a new mine plan based on a revision of the expected average LOM dollar per carat value, which it anticipated would be higher than the average value realised at its two most recent sales of $69/ct.

It still expected the average value to be lower than the original figure of $107/ct used in the bankable feasibility study, however, which it said was due to current market conditions.

“Whilst over the medium term, both market conditions and diamond values are expected to improve, the board recognises that a revised mine plan needs to be developed in the context of the short-term pricing pressures currently being experienced, and with a view to achieving optimal value for shareholders in the longer term.”

The board said it should be noted that at current values, the company would require additional financing and would need to restructure its existing debt obligations in order to be able to deliver such a revised mine plan.

“In this regard, the company has been in productive discussions with both its major shareholders and its debt provider ABSA Bank, with a view to reaching a solution,” the board said.

“Firestone will update the market further once those discussions are complete and the revised mine plan is agreed, which is expected to take place in Q4 calendar year 2017.”