African Diamonds PLC
03 December 2007
3 December 2007
Preliminary Results for Year Ended 30 June 2007
Highlights for period under review and year to date
• The mining license is on track to bring the AK6 diamond discovery into
production by the end of 2009
• The entire capital cost is fully funded with no dilution to existing AFD
shareholders
• Encouraging results have been received from kimberlites AK8 and AK9
• New exploration technology will be deployed on the Makadikadi pans in 2008
• Diamond and gold production is commencing in West Africa
• Prospectivity is improving on the Bugeco kimberlite discoveries in the
Democratic Republic of the Congo
Enquiries:
African Diamonds
John Teeling, Executive Chairman + 353 1 833 2833
James Campbell, Managing Director +27 83 457 3724
Panmure Gordon College Hill
Dominic Morley +44 (0) 20 7459 3600 Paddy Blewer +44 (0) 20 7457 2020
Jonathan Lack Nick Elwes
Statement accompanying the Preliminary Results
Since establishment in 2001 African Diamonds (AFD) has spent a total of £7m to
acquire, a 28.38% interest in the AK6 diamond mine development in Botswana, a
30% interest in Atlas the AFD/De Beers exploration company, a 35.42% interest in
Bugeco S.A., a Congo diamond company and, a 12.5% interest in West African
Diamonds, a diamond and gold company in Sierra Leone and Guinea. Whilst we have
previously been successful in indentifying attractive assets, we have no
intention of resting on our laurels. There are more diamond opportunities in
Botswana, while our Congo and West African operations look good.
The AK6 diamond deposit in Botswana, in which we currently hold a 28.38% stake,
holds pride of place in our portfolio. It is expected to produce diamonds toward
the end of 2009. The capital cost has been funded at no dilution to AFD
shareholders by use of project finance and loans for the AFD equity portion.
While the Botswana core focus is very clearly on bringing the AK6 mine into
production, AFD continues to actively explore for diamonds both through joint
ventures with De Beers and solely on our own acreage. There are more discoveries
to be made in the country.
Outside of Botswana, we hold stakes in two diamond companies. Bugeco S.A.
(35.42% AFD) has a joint venture with De Beers in the Congo (DRC), where two new
kimberlite fields have been discovered, including two large (10 hectare)
diamondiferous pipes. West African Diamonds (12.5% AFD), is AIM listed and at
the final commissioning stages of a gold and diamond operation in Sierra Leone
and, in addition, is currently on target to produce alluvial diamonds in 2008 in
Guinea. It holds exciting exploration prospects in both countries.
The diamond industry is unique. We do not sell carbon. We sell friendship, hope,
romance, mystery and love. An increasing number of people are buying into these
values by purchasing diamonds. Millions of Indian women are now adding diamond
jewellery to their dowries and millions of Chinese are accepting Western customs
associated with diamonds, such as engagement rings. In the advanced Western
economies, in addition to engagement rings, ladies themselves are buying big
gemstone rings to wear on fingers on their right hands. These trends augur well
for diamond demand.
What of supply? Diamonds are fabled because of their scarcity as well as their
mystical qualities. For centuries, only royalty owned these fabulous stones.
Finding and developing a kimberlite diamond mine is one of the rarest events in
mining. There have been only 50 or so kimberlite diamonds mines ever developed.
The biggest by value (Orapa) and the best (Jwaneng), are in Botswana. With the
exception of AK6, and a couple of possibilities in Canada, there are no new
kimberlite mines in development. Existing mines are mature or declining, meaning
a stable supply at best.
A situation where demand is greater than supply is good for prices. Expectations
are for a substantial price rise over the coming years.
The AK6 Mine
Botswana is the best diamond address in the world. The Orapa area in Botswana is
the best street within the address and the AK6 mine will be a fine new edifice
on the best street. It really is as simple as that. With our partner, De Beers,
we were exceptionally lucky to discover AK6. Located about 20 kms west of the
large Lethlakane diamond mine and 20km south of the world's number one diamond
mine by value, Orapa, AK6 was literally a hidden jewel. It is logical to
attribute the discovery to luck but careful selection of exploration ground in
the most prolific diamond province in the world and the application of cutting
edge techniques reduced the risk of failure dramatically.
When AK6 ramps up to full production in 2011 or 2012 it will be a world class
hard rock diamond mine producing up to 1 million carats a year of high value gem
quality diamonds.
Most of the hard work is done. The planning and evaluation are completed, and
financing is in place. The last piece of the jigsaw, the mining licence, is
under application. A final decision on the licence is expected in early 2008
after which construction will begin.
The African Diamonds financial investment in AK6 is being met without any
dilution to existing shareholders. Three quarters of the capital cost is being
provided as project loan finance. The AFD equity portion is being loaned by De
Beers at LIBOR plus 3.0%. The financial package was a good deal when negotiated
in mid 2007. Given the turmoil in equity markets the deal is now very good.
The mine, when it comes on stream, will be state of the art, employing the most
modern and efficient processing technology. A full range of studies covering
geology, mining, metallurgy, hydrology, environment and economics, were
undertaken as part of the Mining Licence Application. The mine will be open cast
for the first 12 years, after which an underground operation will be considered.
It is of interest to note that the two mines close by, Orapa and Lethlakane, are
likely to go underground in the near future.
Other Botswana Activities
It is easy to see AFD as a mine development company only, but this is far from
the truth. We hold extensive exploration ground in the Orapa area of Botswana,
most of which is in the Atlas joint venture with De Beers (30% AFD, 70% De
Beers). Intensive exploration, ranging from early stage anomaly identification,
to large diameter drilling (LDD) on specific targets is underway. The Makadikadi
Pan licence, north of the Orapa mine, is an exciting enigma to diamond
explorers. A look at a map shows more than 75 kimberlites to the south, east and
west of Orapa and only one, an outcrop, north, in the Makadikadi. The salt, and
deep Kalahari sand cover, make exploration difficult but a new geophysical
technique (SQUID) is being employed by De Beers and will be used on the licence
in 2008. Whilst we would need to be exceptionally fortunate to find another
kimberlite with the full potential of AK6, we are in the right place.
Two other Orapa kimberlites, AK8 and AK9, have interesting potential. The AK8
discovery, close to AK6, is tantalising. It is not good enough to become a large
diamond mine in its own right and not bad enough to discard. It looks likely
that the commercial opportunity lies in a smaller section of the Southern Lobe
where grades, and more importantly, diamond values, suggest that a shoestring
operation may be viable. Recent results from large diameter drilling on AK9
discovered diamonds in one part of the pipe. This will be followed up.
Given the exciting prospects that exist in the area, we have strengthened our
wholly owned operation in Botswana. The new team will have as a priority, a
commercial evaluation of AK8 and a ramp up of our own exploration.
African Diamonds holds 100% of licences in Mmashoro as well as five new licences
in the Kedia area to the west of Orapa. Work will begin shortly to identify the
source of diamond indicators found on the Kedia block. These indicators do not
come from Orapa or the Gope diamond field to the south, so the hypothesis is
that an unknown kimberlite cluster exists in the area. This is our target.
Diamond Activities Outside of Botswana
We hold interests in two other diamond ventures. West African Diamonds (12.5%
AFD) should be producing gold and diamonds in Sierra Leone by end 2007. WAD also
has a late stage alluvial development at Bomboko in Guinea, a small medium grade
(19 cpht) high value ($228 a carat) kimberlite pipe in Koidu, Sierra Leone and
good licences in both countries. Bugeco S.A., a Belgian company, (35.42% AFD)
has a joint venture with De Beers on 22 exploration licenses in the Democratic
Republic of the Congo (DRC). Work to date has discovered two new kimberlite
clusters containing at least ten kimberlites, two of which are 10 hectares or
bigger. Bulk sampling will take place in the coming months.
Finance
There has been a distinct shift toward Botswana in the ownership of African
Diamonds which is listed in both London and Gaborone. Between 15% and 20% of the
company is now owned by individuals and institutions in Botswana. We are
delighted with this development and hope that it continues.
We spend very little money. Since foundation, we have raised £10m of which we
hold £3m. The cash balances will be used to fund our growing exploration
activities in Botswana, both in our own right, and in joint venture with De
Beers. Our mine development costs are fully funded while our associated
companies should not require funding.
Future
Shareholders, investors and the public, find it hard to understand the rarity
and value of the AK6 discovery. Despite hundreds of companies spending vast sums
exploring all over the world, commercial kimberlite diamond mines are rarely
discovered.
I point again to the fact that only 50 kimberlite diamond mines have ever been
built and only about 30 are now operating.
AK6 will be one of these rare creatures.
AFRICAN DIAMONDS PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 30 JUNE 2007
2007 2006
£ £
TURNOVER - -
Cost of sales - -
GROSS PROFIT - -
Administrative expenses (491,562) (437,593)
OPERATING LOSS - Continuing operations (491,562) (437,593)
Interest payable and similar charges (2,495) (1,847)
Interest receivable and similar income 129,732 53,803
LOSS ON ORDINARY ACTIVITIES
BEFORE TAXATION (364,325) (385,637)
Tax on loss on ordinary activities - -
LOSS ON ORDINARY ACTIVITIES AFTER
TAXATION FOR THE FINANCIAL YEAR (364,325) (385,637)
LOSS PER SHARE (0.49p) (0.55p)
LOSS PER SHARE - diluted (0.49p) (0.55p)
The above results arise from continuing activities.
AFRICAN DIAMONDS PLC
CONSOLIDATED BALANCE SHEET
AT 30 JUNE 2007
2007 2006
£ £
FIXED ASSETS
Intangible assets 1,947,820 3,582,233
Investments 1,000,000 -
Investment in associates 838,136 5
3,785,956 3,582,238
CURRENT ASSETS
Debtors 113,941 41,150
Cash at bank 3,680,933 4,008,459
3,794,874 4,049,609
CREDITORS: (Amounts falling
due within one year) (52,551) (105,781)
NET CURRENT ASSETS 3,742,323 3,943,828
TOTAL ASSETS LESS CURRENT LIABILITIES 7,528,279 7,526,066
NET ASSETS 7,528,279 7,526,066
CAPITAL AND RESERVES
Called-up share capital 761,558 742,551
Share premium 2,132,676 7,959,917
Share based remuneration reserves 392,300 -
Profit and loss account - surplus/(deficit) 4,241,745 (1,176,402)
EQUITY SHAREHOLDERS' FUNDS 7,528,279 7,526,066
AFRICAN DIAMONDS PLC
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 30 JUNE 2007
2007 2006
£ £
NET CASH OUTFLOW FROM
OPERATING ACTIVITIES (451,333) (433,381)
RETURNS ON INVESTMENTS AND
SERVICING OF FINANCE
Interest paid and similar charges (2,495) (1,847)
Interest received 104,742 53,803
NET CASH INFLOW FROM
RETURNS ON INVESTMENTS
AND SERVICING OF FINANCE 102,247 51,956
NET CASH OUTFLOW FROM
CAPITAL EXPENDITURE AND
FINANCIAL INVESTMENT
Payments to acquire intangible assets (291,992) (754,141)
Payment to acquire investments (1,000,000) -
NET CASH OUTFLOW FROM
CAPITAL EXPENDITURE AND
FINANCIAL INVESTMENT (1,291,992) (754,141)
NET CASH OUTFLOW FROM
ACQUISITIONS AND DISPOSALS
Investment in associate (838,131) -
NET CASH OUTFLOW BEFORE FINANCING (2,479,209) (1,135,566)
FINANCING:
Issue of ordinary share capital for cash 2,368,410 4,492,750
Share issue costs (216,727) -
NET CASH INFLOW FROM FINANCING 2,151,683 4,492,750
(DECREASE)/INCREASE IN CASH (327,526) 3,357,184
AFRICAN DIAMONDS PLC
RECONCILIATION OF MOVEMENTS IN EQUITY SHAREHOLDERS' FUNDS
FOR THE YEAR ENDED 30 JUNE 2007
2007 2006
£ £
Loss for the year (364,325) (385,637)
Repayment of capital in specie relating to demerger (2,177,445) -
Share based remuneration reserves 392,300 -
Issue of shares:
- at par 19,007 72,750
- share premium (net) 2,132,676 4,420,000
Net change in shareholders' funds 2,213 4,107,113
Opening equity shareholders' funds 7,526,066 3,418,953
Closing equity shareholders' funds 7,528,279 7,526,066
CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
FOR THE YEAR ENDED 30 JUNE 2007
2007 2006
£ £
Loss for the year (364,325) (385,637)
Share based remuneration reserves 392,300 -
Total recognised gains and losses for the year 27,975 (385,637)
Notes:
The financial information set out above does not constitute the Company's
financial statements for the year ended 30 June 2007. The financial information
for 2006 is derived from the financial statements for 2006 which have been
delivered to the Registrar of Companies. The auditors have reported on 2006
statements; their report was unqualified and did not contain a statement under
section 237(2) or (3) of the Companies Act 1985. The financial statements for
2007 have been audited and will be delivered to the Registrar of Companies
following the Company's Annual General Meeting. The auditors have reported on
the 2007 statements; their report was unqualified and did not contain a
statement under section 237(2) or (3) of the Companies Act 1985.
A copy of the Company's annual report and accounts for 2007 will be mailed to
all shareholders shortly and will also be available for collection from the
Company's registered office, 20-22 Bedford Row, London WC1R 4JS.
This information is provided by RNS
The company news service from the London Stock Exchange