TIDMNAD
RNS Number : 3308R
Namakwa Diamonds Limited
29 April 2009
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April 29, 2009
LSE: NAD
Results for Six Months Ended 28th February, 2009
Namakwa Diamonds Limited ("Namakwa" or the "Company"), a vertically integrated
diamond mining company, today issues its results for the six months ended 28
February 2009. The Directors also take this opportunity to update shareholders
on significant events since period end.
Key Highlights for period under review
* Namakwa well positioned to weather the economic downturn and will not require
additional capital to fund its operations and expansion plan;
* Unique integrated business model enabled Namakwa to adapt to the change in
market conditions;
* Despite the economic climate curtailing most diamond mining operations
globally, Namakwa continues mining on a cash positive basis, albeit on a smaller
scale and other mining operations remain in a state of readiness, and will start
production at profitable levels once the market upturn and/or beneficiation
margin extraction materialises;
* The Beneficiation Segment's trading post the market adjustment, albeit at
smaller volumes, has demonstrated the resilience and flexibility of the Namakwa
business model as this segment has started to witness margin growth on sales of
newly acquired inventory through utilising the Company's broad network and
industry knowledge;
* Production in the DRC has started and will be increased to planned capacity in
the months to come. Namakwa is now one of the only producing diamond companies
in the DRC;
* Mining projects developed in-house such as the South East Node and DRC Dense
Medium Separation plant ("DMS") commissioning will improve capacity and yield;
* Operational expenditure in the mining segment has been cut back
significantly, resulting in substantial cash costs savings.
Salient Figure Summary
The financial table below details the results for H1 2009, and for comparative
purposes H1 2008 and FY 2008, but the figures must been seen in the context of
the extenuating circumstances during H1 2008 and H1 2009. During H1 2008 Namakwa
witnessed electricity outages and abnormal rainfall that impacted production
whilst H1 2009 has presented the Group with the most challenging operating
environment in its 30 year history following the impact of the global economic
crisis on the diamond industry.
+----------------------------------------+-------+-----------+-----------+-----------+
| Period | Note | H1 2009 | H1 2008 | FY 2008 |
+----------------------------------------+-------+-----------+-----------+-----------+
| Revenue (US$ 000) | | 7,835 | 12,426 | 41,722 |
+----------------------------------------+-------+-----------+-----------+-----------+
| Loss for the period (US$ 000) | | (76,674) | (19,409) | (39,002) |
+----------------------------------------+-------+-----------+-----------+-----------+
| Operational cash loss (US$ 000) | 1 | (8,934) | - | (7,813) |
+----------------------------------------+-------+-----------+-----------+-----------+
| Carats mined | 2 | 14,160 | 9,517 | 27,177 |
+----------------------------------------+-------+-----------+-----------+-----------+
| Tonnes mined | | 1,233,983 | 2,967,481 | 5,849,251 |
+----------------------------------------+-------+-----------+-----------+-----------+
| Cash cost per tonne mined (ZAR/ton) | 3 | 56.63 | 25.74 | 32.19 |
+----------------------------------------+-------+-----------+-----------+-----------+
| Cash cost per tonne mined (US$/ton) | 3 | 5.87 | 3.65 | 4.35 |
+----------------------------------------+-------+-----------+-----------+-----------+
| Recovered grade (cpht) | | 0.56 | 0.32 | 0.35 |
+----------------------------------------+-------+-----------+-----------+-----------+
| Rough carats purchased | 4 | 8,082 | 9,533 | 183,562 |
+----------------------------------------+-------+-----------+-----------+-----------+
| Rough carats sold | 4 | 139,565 | 15,342 | 74,112 |
+----------------------------------------+-------+-----------+-----------+-----------+
| Capex spent (US$ 000) | | 7,469 | 13,128 | 42,021 |
+----------------------------------------+-------+-----------+-----------+-----------+
| Carats in inventory: | | 29,690 | 10,564 | 143,810 |
| Rough | | 1,872 | 834 | 793 |
| Polished | | | | |
+----------------------------------------+-------+-----------+-----------+-----------+
| Inventory value (US$ 000) | | 21,887 | 12,409 | 48,719 |
+----------------------------------------+-------+-----------+-----------+-----------+
| Cash balance (US$ 000) | | 21,395 | 138,579 | 52,020 |
+----------------------------------------+-------+-----------+-----------+-----------+
1. Indicates the direct operational cash loss for the period and was calculated
for the first time at the previous year end. Full detail is disclosed in the
segment analysis included in the mining segment review.
2. Carats recovered and tonnes mined during H1 2009 were effectively for a three
month period only due to the operations being curtailed and closed down for
longer than anticipated during the reorganisation period. The carats recovered
in this period include contractor production. Carats and tonnes mined relate to
own mining activities only and exclude tonnes mined by contract miners. The
carats mined in the DRC during H1 2009 are not included above. To date, trial
mining has produced approximately 4,500 carats.
3. Cash cost per tonne in H1 2009 is not a reflection of steady state mining
cost as it includes overheads, rehabilitation and retrenchment costs relating to
periods where no mining took place. The cash cost per tonne for the three month
period that mining took place was R38.60 (US$4.15) per tonne. Cash costs include
corporate costs allocated to the mining segment. More detail is supplied in the
Mining Segment Review.
4. Carats purchased during H1 2009 reflect the impact of production cut backs
on the supply of rough diamonds. The high number of carats sold in H1 2009 is as
a result of the disposal of the bulk of low value product purchased during the
previous period. More detail is supplied in the Beneficiation Segment review.
Balance Sheet Strength
* Net working capital of US$48.9 million with cash on hand of US$21.4 million
* There is no requirement to raise further capital;
* Diamond inventory is valued at US$21.9 million after impairment and
is reflected at the lower of cost or net realisable value on the balance sheet,
fully recognising current diamond prices and macro economic uncertainties. The
lower book value of inventory in management's opinion is as a direct consequence
of extraordinary business conditions during the reporting period given the
current economic climate;
* Accounting impairments centre around the terminology of "ordinary course of
business" the revaluation of the inventory had to be conducted to reflect
expected values over the next 12 months bearing in mind that management believe
that the concept of "ordinary course of business" has changed dramatically in
the negative taking account of end user demand, industry liquidity and general
levels of investment by participants in the value chain. The carrying value of
inventory in management's opinion is a reflection of value in current economic
conditions and is not reflective of the value of the product that could be
realised over time;
* An impairment provision of US$25.2 million after tax was raised against mining
properties and goodwill carrying value in recognition of the uncertainty that
the lack of direction in diamond prices places on future cash flows. Namakwa
believes that the value will return over time and currently all mines are in a
state of operational readiness to react to such a change.
Challenging Mining and Beneficiation Operating Environment
* Most difficult diamond trading environment in the 30 year history of the
business encountered during the period under review;
* The market is in unchartered territory given the drastic drop in rough diamond
prices but it is clear that the imbalance between the supply and demand of rough
diamonds caused by the closure of many producers will positively impact prices
in the future. Apart from the 'low value' products that were revalued and
impaired during February 2009, Namakwa sold inventory still carried at its
original cost at a gross loss of under 9%, a very good achievement given that
rough market prices in general declined by between 40% to 70%;
* Downturn in diamond prices and liquidity issues in diamond markets was
recognised early and cost cutting measures such as a reduction in mining
activities implemented in a timely manner with the effect on costs optimised;
* The carrying value of inventory was impaired and a cost of US$32.1 million
recognised during the period due to the macro changes of the definition of
ordinary course of business in the diamond value chain;
* High inventory levels at cutting centres, scarce liquidity in the market and
poor demand were mitigated by Namakwa's disposal of the majority of low quality
inventory into newly developed sales channels and selective purchase of rough
diamonds that will yield above average margins, Namakwa's market knowledge of
downstream activity allows for a quicker response time when diamond
prices upturn. This is evident in the fact that extremely high margins have been
realized post the reporting period albeit in small parcels and low volumes.
State of Readiness
* The alluvial nature of Namakwa's mining activities allows for a quick re-start
of operations without any need for significant additional capital. The DMS
projects at the South East Node and in the DRC are in the process of
commissioning and trial mining and will be ready to resume operations to take
advantage of any price improvement. The South East Node project was assessed,
modelled and developed by the Namakwa team and incorporates a world class
alluvial deposit with a good grade, which is expected to produce a high
value product;
* Inventory holding adapted to improve quality and focus on in-demand categories.
It is clear that the nature of the diamond business has changed dramatically and
only people able to adapt to new volumes of trading, number of sales categories
and the high level of required confidence in clients will survive;
* Improved diamond distribution network resulting from:
* Opening of the Tel Aviv trading office brings access to new customers, suppliers
and beneficiation plants in a very active diamond centre;
* Swiss Gold joint venture established for distribution to current Middle East
markets such as Dubai, other parts of the UAE and Jordan amongst others;
* Multiple new marketing associations formed and developed.
* Angolan buying operation delivering steady supply and higher than
expected margins in current market;
* Namakwa's beneficiation experience presents buying opportunities as the sale of
goods acquired under current conditions is seen to deliver returns not expected
in normalised economic climates;
* The weak market has presented a number of acquisition and resource expansion
opportunities which Namakwa is ready to capitalise on.
Board of Directors Fully Combined Code compliant
* With the appointment of James Cross, formerly Senior Deputy Governor at the SA
Reserve Bank, to the Namakwa Board of Directors along with the reorganisation of
the Board's committees ensures Namakwa is fully compliant with the Combined
Code;
Nico Kruger, Chief Executive Officer of Namakwa Diamonds commented:
"The impact of the global economic crisis on the diamond industry in the first
half of this financial year has been substantial and has been the dominant
factor over this period. There has been a considerable drop in both rough and
polished prices, with most producers scaling back operations or shutting down
their mines completely, coupled with an almost complete freeze in rough trading,
as trading houses' credit lines were reduced by the financial institutions which
traditionally financed them. In light of these conditions, Namakwa undertook a
review of operations in November 2008 which resulted in it scaling back
operations substantially by placing 4 mines on care and maintenance and
implemented various cost cutting measures to focus on preservation of cash
and the maximisation of value in the long run.
The management team adopted a proactive approach to ensure that Namakwa is well
positioned to weather the current volatility in the sector. Our business model
affords the company flexibility to scale back mining operations and take
advantage of buying opportunities with the ability to increase production very
quickly when there is a positive trend in diamond prices.
In February 2009, due to continuing worsening market conditions Namakwa had to
re-assess its diamond inventory, which the Company believes have undergone a
long term-price reduction. Valuation of diamond inventory was
revised immediately prior to the release of this report, to discount value in
line with global price uncertainty. The total impairment cost recognised during
this reporting period amounted to US$32.1 million. With current inventory
prudently valued at US$21.9 million and a cash position of US$21.4 million,
Namakwa's balance sheet remains robust despite ongoing market uncertainty. I am
confident Namakwa is well positioned to take advantage of the current buying
opportunities as well as ramp up production quickly and effectively in the
medium term as and when market conditions improve."
DIRECTORS' REPORT
Diamond Sector Update
The continued global economic weakness led to extreme volatility across the
diamond value chain. Over the last six months many diamond producers have
suspended production due to decreasing prices for both rough and polished
diamonds. Almost no mines remained open from mid-December and a number of major
producers delayed the opening of their mines in 2009. As expected, these factors
contributed to a substantial decrease in global production for the period, with
industry experts estimating a reduction in rough diamond production of 40%
to 50% year-on-year.
As announced in the Interim Management Statement on 15 January 2009, Namakwa
Diamonds undertook a review of operations at all its producing mines, and
following the completion of this review in February 2009 the Board decided to
scale back operations in the North West province of South Africa. In addition,
other cost cutting measures were implemented such as the unavoidable
retrenchment of a large proportion of the total workforce along with a greater
focus on the beneficiation and trading division of the Company. The
retrenchments were regrettable but unavoidable under the current circumstances
and Namakwa hope to re-employ a large contingent of staff laid off once the
market upturn materialises. Namakwa's unique business model, deep industry
knowledge and balance sheet strength affords the Company the flexibility to
adapt its strategy according to market conditions.
Retail Environment
Uncertainty remains as demonstrated by a poll conducted by the Jewellery
Consumer Opinion Council which showed that 58% of consumers were unwilling to
spend on discretionary items within a year. According to Bain & Co luxury goods
sales will drop as much as 20% in the first two quarters of 2009 before
stabilising in the second half, with sales of jewellery forecast to fall by 12%
in 2009. Bain also expects sales of luxury items to rise by 7% in China and 2%
in the Middle East.
Rough Diamond Market and Pricing Environment
As a result of the reduction in prices, the rough diamond market has seen a
reduction in supply and trading activity through the current reporting
period. Demand weakness has resulted in significant production cuts from many
producers. Rough prices in the period under review decreased by between 40% and
70% and as a result of distressed sales contributed to creating buying
opportunities for companies with the adequate level of liquidity. The distressed
state of the market, particularly the rough diamond trading market, was
exacerbated by forced sellers - producers who had to sell to pay for operational
expenses, as well as trading houses whose credit lines had been reduced. This
was in addition to reluctant buyers who, despite reduced trading prices, faced
severe pricing uncertainty.
As Namakwa has the ability to beneficiate its own rough diamonds, the Company
has the option to sell rough or polished stones depending on margins. In the
longer term, the lower supply of rough goods is expected to stabilise and
positively affect prices. Namakwa continues to actively adjust the composition
of its inventory, as evidenced by the sale of the bulk of slow moving and low
value inventory, to ensure that the Company is able to capitalise on future
opportunities as they arise.
Polished Diamond Market and Pricing Environment
According to polishedprices.com wholesale polished prices across the industry
decreased during the period under review by 15% to 20%, significantly less than
the decrease in rough diamond prices.
A number of factors influenced the polished diamond sector during the period.
The reduction in credit facility extension made it increasingly difficult for
diamantaires to finance inventory purchases and contributed, along with reduced
demand, to force manufacturing closures, layoffs and return of goods.
The impact of these factors has been to significantly reduce the supply of new
polished diamonds which in return should have a positive impact on pricing when
liquidity improves.
Beneficiation Segment Review
As stated in the diamond price review, the full impact of the global economic
crisis on rough diamond prices became clear towards the end of the 2008 calendar
year. The recovery timeframe remains uncertain.
Namakwa started the year with 143,810 carats of rough diamonds in stock, mostly
acquired during the previous year under strong pricing conditions at an average
cost of $311 per carat. During February 2009 categories of stones were
identified that were not expected to materially appreciate over a 2 year
period, and impaired to and sold at current realisable value. Recognising the
widespread uncertainty regarding diamond prices for the next few terms,
inventory on hand at 28 February 2009 was valued at probable prices attainable
in the short term. The carrying value of inventory in management's opinion is a
reflection of value in current economic conditions and is not reflective of the
value of the product that could be realised over time. The total impairment
provision recognised during the period amounted to US$32.1 million.
Several measures were put in place to improve the value of Namakwa's inventory,
including:
* Sale of inventory with slow price recovery potential and deemed to have
undergone a long term value impairment due to changed market demand and
conditions;
* Third party purchases have been limited to deals allowing above average margins
due to distressed sellers with more realistic price expectations;
* Maximising value by polishing high quality stones as well as stones yielding
polished sizes specific to short term demand;
Namakwa established its Tel Aviv distribution office during the period and the
first sales transactions took place during February 2009. The presence in Tel
Aviv secured access to new customers in a well developed marketing network,
buying opportunities as well as high quality beneficiation plants.
Namakwa also gained access to the Angolan market through an association with a
license holder allowing the purchase of fine quality rough diamonds.
During the period under review Namakwa acquired 8,082 carats of rough diamonds
from third party producers at an average cost of US$514 per carat and 14,160
carats from the Namakwa Mining Segment with an average value of US$438 per
carat. The Company sold 139,565 carats of rough diamonds at an average price of
US$45 to third parties. Sales included 121,586 carats of the lower quality
product revalued in January at $22 per carat.
On 28 February 2009, Namakwa held 29,690 (31 August 2008: 143,810) carats of
rough diamonds with an average cost of US$1,092 (31 August 2008: US$311) per
carat and a book value after impairment of US$458 per carat. Namakwa also owned
1,872 (31 August 2009: 793) carats of polished diamonds with an average cost of
US$7,751 (31 August 2008: US$4,990) per carat and a book value after revaluation
of US$4,397 per carat.
The beneficiation segment managed to limit gross loss on the sale of rough
diamonds which had not yet been impaired to an average of below 9%, a
satisfactory result given that rough market prices have dropped by 40% to 70%
across various categories.
The beneficiation segment posted a loss mainly as a result of disposing of
inventory acquired during the previous period. Trading post period end, albeit
at smaller volumes, has demonstrated the resilience and flexibility of the
Namakwa business model as the beneficiation segment has started to witness
margin growth on sales of newly acquired inventory through the utilising the
Company's broad network and industry knowledge.
Mining Overview
Mining Segment Review
Mining operations in the North-West Province were significantly curtailed as the
impact of the global economic meltdown on rough diamond prices rendered most
mining operations uneconomical. Early shutdown took place at all mines in
December 2008 and it was decided to place several of the operations on care and
maintenance excluding Northern Node and Central Node, until diamond prices
improve. Subsequently mining at Northern Node and Central Node resumed in
February 2009. The latter has subsequently also been placed on care and
maintenance due to the current pricing environment. Production has been
bolstered by the continued use of contractors at Namakwa's North-West
operations, who produce at their own cost with purchases at Namakwa's option at
a discount to market.
Cost saving measures, mainly through retrenchment of mining as well as support
staff were also implemented. Sufficient staff was retained to continue mining at
a much reduced level, perform rehabilitation and care and maintenance activities
and to continue with vital strategic development plans like the scheduled
commissioning of the first DMS plant.
As a result of the above and with production continuing at one mine only,
combined with reduced contractor activity, Namakwa had to abandon its original
production forecast for the year. The level of production for the remainder of
the year is dependent on the diamond prices for the period. Namakwa produced
14,160 carats, mainly during the first three months, of the six months under
review compared to 9,517 carats during the same period in the preceding year
when operations were hampered by power outages and abnormal rainfall. Management
is confident that all mining operations will be able to return to production
within a relatively short period of time, as and when market conditions improve.
At 0.56 cpht the recovered grade continued to exceed expectations. The grade for
the comparative period was 0.32 cpht and for the full year 2008 at 0.35 cpht.
Although ongoing mining overheads were significantly reduced due to
retrenchments, operational expenses for the remainder of the period were
inflated by retrenchment costs, ongoing rehabilitation and the retention of a
strategic team. This coupled with higher than expected mining costs, driven by a
higher than expected diesel price as reported previously, resulted in an
operating loss of US$7.4 million and a cash operating loss of US$6.5 million for
the period. The difference between the two is set out in the mining segment
review below.
Although some expenses such as rehabilitation and staff cost will continue, the
company has significantly reduced mining expenditure.
Given the uncertainty that exists surrounding the recovery of rough diamond
prices, the book value of all goodwill and undeveloped property was written off
during the period. The total impairment cost amounted to US$26.9 million
resulting in a total segment loss of US$31.6 million before tax.
The total loss after tax above includes the following non-cash items:
+--------------------------------------------+---------------------------+---------------------------+
| - Depreciation | US$ | 1,359,000 |
+--------------------------------------------+---------------------------+---------------------------+
| - Share based payments | US$ | 183,000 |
+--------------------------------------------+---------------------------+---------------------------+
| - Decrease in provision for rehabilitation | US$ | (623,000) |
+--------------------------------------------+---------------------------+---------------------------+
| - Impairment cost | US$ | 26,901,000 |
+--------------------------------------------+---------------------------+---------------------------+
| And other non-operational cash expenses: | | |
+--------------------------------------------+---------------------------+---------------------------+
| - Corporate cost allocation | US$ | 510,000 |
+--------------------------------------------+---------------------------+---------------------------+
| - Exploration expense | US$ | 311,000 |
+--------------------------------------------+---------------------------+---------------------------+
The segment analysis below provides information on the operational cash loss for
all the segments:
+------------------------+------------+------------+---------------+-------------+------------+
| | Total | Mining |Beneficiation |Exploration | Other |
| | | | | | |
+------------------------+------------+------------+---------------+-------------+------------+
| Gross (loss) | (36,021) | (6,468) | (29,341) | (199) | (14) |
+------------------------+------------+------------+---------------+-------------+------------+
| Operating expenses | (15,428) | (1,724) | (1,899) | (6,832) | (4,973) |
+------------------------+------------+------------+---------------+-------------+------------+
| Impairment of assets | (27,615) | (26,901) | (313) | (401) | - |
+------------------------+------------+------------+---------------+-------------+------------+
| | | | | | |
+------------------------+------------+------------+---------------+-------------+------------+
| Segment (loss) per | (79,064) | (35,093) | (31,554) | (7,431) | (4,986) |
| segment report | | | | | |
+------------------------+------------+------------+---------------+-------------+------------+
| Non cash expenses: | | | | | |
+------------------------+------------+------------+---------------+-------------+------------+
| - Depreciation | 1,833 | 1,359 | 44 | 383 | 47 |
+------------------------+------------+------------+---------------+-------------+------------+
| - Share based payments | 617 | 183 | 192 | 111 | 131 |
+------------------------+------------+------------+---------------+-------------+------------+
| - Impairment of assets | 27,615 | 26,901 | 313 | 401 | - |
+------------------------+------------+------------+---------------+-------------+------------+
| - Impairment of | 32,116 | | 32,116 | | |
| inventory | | | | | |
+------------------------+------------+------------+---------------+-------------+------------+
| - Decrease in | (623) | (623) | - | - | - |
| provision for | | | | | |
| rehabilitation | | | | | |
+------------------------+------------+------------+---------------+-------------+------------+
| Non-operating cash | | | | | |
| expenses: | | | | | |
+------------------------+------------+------------+---------------+-------------+------------+
| - Exploration expense | 6,809 | 311 | 3 | 6,495 | - |
+------------------------+------------+------------+---------------+-------------+------------+
| - Corporate cost | 1,547 | 510 | 548 | 490 | - |
+------------------------+------------+------------+---------------+-------------+------------+
| - Acquired exploration | 216 | | | - | 216 |
| properties expensed | | | | | |
+------------------------+------------+------------+---------------+-------------+------------+
| | | | | | |
+------------------------+------------+------------+---------------+-------------+------------+
| Operational cash | (8,934) | (6,452) | 1,662 | 448 | (4,592) |
| profit/(loss) | | | | | |
+------------------------+------------+------------+---------------+-------------+------------+
The principal reasons for the operational loss are attributable to:
* Drastically reduced diamond prices;
* Low mining activity during the latter half of the period under review;
* Retrenchment cost, continued rehabilitation and overhead expenses in period when
virtually no mining took place;
* High unit cost driven by low tonnage production, diesel and maintenance cost.
Cash cost per tonne was R56.53 (US$5.87). Cash cost per tonne excluding the
non-operational expenses in the table above was R52.53 (US$5.45). The cash costs
above, however, are not reflective of the historical steady state mining as the
costs cover the full six month period while full scale mining was only for a
three month period. The cash cost per tonne for the initial three months of the
period was R38.60 (US$4.15) and R30.56 (US$3.28) after exclusion of the
non-operational expenses.
Namakwa is positive about the grade that can be achieved in the
North West Province and is considering options to expand mining under current
market conditions. These options include:
* Commissioning of DMS plant in areas requiring shorter and better haul routes;
* Small scale mining in high yielding areas;
* Contractor operations.
North West Expansion Programme
Namakwa's expansion plan in the North West has been curtailed in line with
market conditions. The original plan to commission a combination of three DMS
plants and tailor made 4-pan units by June 2009 is not justified given the
current diamond price uncertainty. Instead, one DMS plant will be commissioned
and production levels will be evaluated on an ongoing basis given the economic
environment and diamond prices at the time.
Although the greater portion of Namakwa's North West operations has been placed
on care and maintenance most of the mines will require little time and capital
to re-start once diamond prices recover. The newly commissioned DMS plant
further improves the company's state of readiness to take advantage of any
improvement in prices.
Continued Alluvial Consolidation
Namakwa has sufficient resources in the North-West province to sustain
production. Due to the depressed state of the diamond market there are a number
of opportunities available to Namakwa. In line with its stated strategy Namakwa
will assess these opportunities and act on them if they represent good value for
shareholders.
Activities in the DRC
Small scale trial mining commenced during December 2008 utilising the mobile
10tph DMS sampling plant. The first of two 30 tph DMS plants has been
commissioned and commissioning of the second is planned for May. This will bring
the DRC capital project to completion and further trial mining will take place
during the ensuing three months. Sufficient earth moving equipment is available
on site to feed all three plants. Sampling results delivered grades which vary
from 2.2 cpht to 24 cpht. The average grade sampled at the targeted trial
mining area is 10.9 cpht. Up to the date of this report approximately 4,500
carats have been recovered.
Activities in Namibia
In light of the current diamond environment and operational priorities of both
Nutam (Pty) Limited and Namakwa, the agreement for a technical partnership
concluded with Nutam in September 2008 was abandoned by both parties. However,
the exploration of the Tidal concession areas is being pursued and discussions
with a contractor are underway.
Agreement with Swiss Gold
As previously announced, Namakwa has established a joint venture with Swiss Gold
DMCC ('Swiss Gold'), a leading gold bullion trading house in the Middle East and
one of the leading suppliers of gold jewellery to the wholesale market in the
Middle East. This new entity will be called Swiss Diamonds DMCC ('Swiss
Diamonds' or the 'Joint Venture') and will be taking up offices in the new Dubai
Multi Commodities Centre (DMCC) diamond building, ALMAZ Towers. Under the terms
of the Joint Venture, Namakwa will supply diamonds to Swiss Diamonds and Swiss
Gold will supply it with gold. Swiss Diamonds will then sub-contract the
manufacture of jewellery, which it will sell via wholesale and retail channels.
The combination of Swiss Gold's access to its extensive gold and jewellery
trading network and Namakwa's diamond mining, buying and beneficiation expertise
will enable the Joint Venture to capture value from a greater portion of the
diamond value chain.
The joint venture is further evidence of Namakwa's unique ability to penetrate
the diamond value chain, particularly the higher margin retail market, and
represents a foothold in this increasingly important territory. The customer
base in this region is particularly significant to future diamond demand due to
their tendency to use high caratage jewellery as a store of wealth and even an
asset class for investment purposes. Due to economic realities the initiation of
this venture will be linked to an improvement in the Middle Eastern economies.
Working Capital and Capital Expenditure
Refer to the commentary on the Balance Sheet below for a summary of the Group's
working capital.
The Group has almost completed its capex programmes in the North West Province
and the DRC on schedule. Completion and commissioning cost is budgeted at $1.3
million.
The Company has sufficient cash and other net working capital that is required
to fund its activities for the foreseeable future and does not anticipate the
need to raise any additional funds.
Board Appointment and Management Restructure
James Cross has been appointed as a Non-Executive Director with effect from 1
March 2009, and brings a wealth of experience and expertise to the Board. James
joined the South African Reserve Bank in 1986 and stepped down from his position
as Senior Deputy Governor in 2001. He has since chaired the Board of Directors
of the South African Mint Co (Pty) Ltd and the South African Bank Note Company
(Pty) Ltd from 2002 to 2006, as well as Highland Gold Mining Limited from 2004
to 2008. James currently chairs the Financial Markets Advisory Board in South
Africa, is Deputy Chair of the Policy Board advising the Government on market
policy and a member of the Board of the Financial Services Board in South
Africa. He is chairing the commodities trader Swiss Gold DMCC based in Dubai and
is a director of MKS Finance Geneva.
Andries Janzen has stepped down as an Executive Director whilst remaining an
employee, to allow for a smooth transition and succession planning. The
Directors thank Andries for his valuable contribution to the Board.
In addition, in order to streamline the management structure and ensure maximum
efficiency, Jacques Conradie replaces Jean Nel as Chief Financial Officer with
immediate effect. Jacques has been with Namakwa for 2 years in his role as Group
Financial Manager having previously acted as Financial Director for a large
logistics firm. Jacques has also been appointed to the Board as an Executive
Director. Jean Nel has been appointed as Chief Strategy and Business Development
Officer responsible for strategy and corporate finance and will continue in his
current position on the Board of Directors. James Cross and Jacques Conradie do
not hold any other Directorships than those disclosed above.
Furthermore, the Board committees have been reorganised in order to fulfil
Namakwa's commitment to be compliant with the Combined Code. Following the
restructure the composition of the committees is as follows:
+-----------------------------------------------+-----------+------------+--------------+-----------+-------------+------------+
| | Board of | Audit | Remuneration | SHE | Nominations | Strategy |
| | Directors | Committees | Committee | Committee | Committee | committee |
| | | | | | | ** |
+-----------------------------------------------+-----------+------------+--------------+-----------+-------------+------------+
| Hans Smith, Chairman | 4* | | | | | |
+-----------------------------------------------+-----------+------------+--------------+-----------+-------------+------------+
| Edward Haslam, Senior Independent Non Exec | 4 | 4 | 4* | 4 | 4 | 4 |
| Director | | | | | | |
+-----------------------------------------------+-----------+------------+--------------+-----------+-------------+------------+
| James Cross, Independent Non Executive | 4 | 4 | | | | |
| Director | | | | | | |
+-----------------------------------------------+-----------+------------+--------------+-----------+-------------+------------+
| John Coulter, Independent Non Executive | 4 | 4* | 4 | | | |
| Director | | | | | | |
+-----------------------------------------------+-----------+------------+--------------+-----------+-------------+------------+
| Con Fauconnier, Independent Non Executive | 4 | | 4 | 4* | 4* | |
| Director | | | | | | |
+-----------------------------------------------+-----------+------------+--------------+-----------+-------------+------------+
| Alex Davidson, Independent Non Executive | 4 | | | 4 | 4 | 4 |
| Director | | | | | | |
+-----------------------------------------------+-----------+------------+--------------+-----------+-------------+------------+
| Tom Kruger, Deputy Chairman & Founder | 4 | | | | | |
+-----------------------------------------------+-----------+------------+--------------+-----------+-------------+------------+
| Nico Kruger, Chief Executive Officer | 4 | 4 | 4 | | | 4 |
+-----------------------------------------------+-----------+------------+--------------+-----------+-------------+------------+
| Heno Kruger, Executive Director, Trade & | 4 | 4 | | | | |
| Beneficiation | | | | | | |
+-----------------------------------------------+-----------+------------+--------------+-----------+-------------+------------+
| Jean Nel, Chief Strategy & Business | 4 | 4 | 4 | | | 4 |
| Development Officer | | | | | | |
+-----------------------------------------------+-----------+------------+--------------+-----------+-------------+------------+
| Altie Krige, Chief Operating Officer | 4 | | | 4 | | |
+-----------------------------------------------+-----------+------------+--------------+-----------+-------------+------------+
| Jacques Conradie, Chief Financial Officer | 4 | 4 | 4 | | | 4 |
+-----------------------------------------------+-----------+------------+--------------+-----------+-------------+------------+
* denotes Chairman of the Committee
** The Strategy committee convenes on an adhoc basis at least 4 times per annum
Commentary on the Financial Statements for the six months ended 28 February
2009
Income statement
The Group's loss for the period under review, after impairments, totalled
US$76.7 million compared to a loss of US$19.4 million for the six month period
which ended on 29 February 2008. To provide helpful context the following should
be noted:
* Historical information is not comparable to the current results due to the
negative impact of the current worldwide economical crisis. Lower diamond prices
forced the organisation to follow a cash preservation approach compared to the
significant expansion projects undertaken in the previous period;
* Due to current uneconomical diamond mining conditions, 562 Employees were
retrenched at a total cost of US$0.41 million to the company;
* Abnormal low current diamond prices caused Namakwa to process diamond inventory
impairments to the value of US$32.1 million;
* Namakwa impaired goodwill and diamond mining and exploration properties to the
value of US$25.2 million after tax (US$27.6 million before tax);
* Consistent with its accounting policy, Namakwa expensed exploration and
development costs incurred, save for plant and equipment acquired during the
period, amounting to US$6.8 million;
* Non-cash equity payments to employees expensed amounted to US$0.6 million and
were expensed;
* Loss per share and diluted loss per share for the period ended 28 February 2009
was US$0.61 (28 February 2008: US$0.23).
Balance sheet
As at 28 February 2009 Namakwa had:
* Cash of US$21.4 million at hand, diamond inventory of US$21.9. million and
receivables of US$ 8.0 million, resulting in current assets of US$52.2 million;
* The company will benefit from its strong liquidity due to available cash and
inventory level;
* Current liabilities of US$3.3 million and non-current liabilities of US$3.8
million, resulting in net working capital of US$48.9 million; and
* Property, plant and equipment amounting to US$ 38.5 million.
As of 28 February 2009, there were 118,978,257 ordinary shares in issue.
Investors should be aware of the financial impact of the 6,866,448 "A" shares in
the capital of a South African intermediary holding company which have a
dilutive effect, since they effectively carry economic rights similar to
ordinary shares, including the right to any dividend.
Namakwa's financial results have consistently been reported in accordance with
International Financial Reporting Standards ("IFRS").
INDEPENDENT REVIEW REPORT
of half yearly consolidated financial information to Namakwa Diamonds Limited
Introduction
We have been engaged by the company to review the condensed set of consolidated
financial information in the half-yearly financial report of Namakwa Diamonds
Limited for the six months ended 28 February 2009, which comprises the income
statement, balance sheet, statement of changes in equity, cash flow statement
and related notes. We have read the other information contained in the half
yearly financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in the condensed
set of financial information.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved
by, the directors. The directors are responsible for preparing the half-yearly
financial report in accordance with the Disclosure and Transparency Rules of the
United Kingdom's Financial Services Authority. As disclosed in note 2, the
annual financial statements of the group are prepared in accordance with IFRS.
The condensed set of financial information included in this half-yearly
financial report has been prepared in accordance with International Accounting
Standard 34, 'Interim Financial Reporting'.
Our responsibility
Our responsibility is to express to the company a conclusion on the condensed
set of financial information in the half-yearly financial report based on our
review. This report, including the conclusion, has been prepared for and only
for the company for the purpose of the Disclosure and Transparency Rules of the
Financial Services Authority and for no other purpose. We do not, in producing
this report, accept or assume responsibility for any other purpose or to any
other person to whom this report is shown or into whose hands it may come save
where expressly agreed by our prior consent in writing.
Scope of review
We conducted our review in accordance with International Standard on Review
Engagements 2410, 'Review of Interim Financial Information Performed by the
Independent Auditor of the Entity' issued by the Auditing Practices Board. A
review of interim financial information consists of making enquiries, primarily
of persons responsible for financial and accounting matters, and applying
analytical and other review procedures. A review is substantially less in scope
than an audit conducted in accordance with International Standards on Auditing
and consequently does not enable us to obtain assurance that we would become
aware of all significant matters that might be identified in an audit.
Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe
that the condensed set of consolidated financial information in the half-yearly
financial report for the six months ended 28 February 2009 is not prepared, in
all material respects, in accordance with International Accounting Standard 34
and the Disclosure and Transparency Rules of the United Kingdom's Financial
Services Authority.
PricewaterhouseCoopers Inc
Director: JFM Kotze
Registered Auditor
Johannesburg
29 April 2009 Consolidated income statement
+-----------------------------------------------+-------+--------------+--------------+
| | | 6 months to | 6 months to |
| | | 28 February | 29 February |
+-----------------------------------------------+-------+--------------+--------------+
| In thousands of US dollars | Note | 2009 | 2008 |
| | | | |
+-----------------------------------------------+-------+--------------+--------------+
| | | Unaudited | Unaudited |
+-----------------------------------------------+-------+--------------+--------------+
| | | | |
+-----------------------------------------------+-------+--------------+--------------+
| Revenue | | 7 835 | 12 426 |
+-----------------------------------------------+-------+--------------+--------------+
| Cost of sales | 5 | (43 856) | (14 275) |
+-----------------------------------------------+-------+--------------+--------------+
| Gross loss | | (36 021) | (1 849) |
+-----------------------------------------------+-------+--------------+--------------+
| | | | |
+-----------------------------------------------+-------+--------------+--------------+
| Other (expenses)/income | 6 | (143) | 48 |
+-----------------------------------------------+-------+--------------+--------------+
| Impairment of non-financial assets | 4 | (27 615) | - |
+-----------------------------------------------+-------+--------------+--------------+
| Exploration expenses | | (6 809) | (2 759) |
+-----------------------------------------------+-------+--------------+--------------+
| Acquired exploration properties expensed | | (216) | (4 204) |
+-----------------------------------------------+-------+--------------+--------------+
| Listing cost expensed | | - | (4 128) |
+-----------------------------------------------+-------+--------------+--------------+
| Other operating expenses | 7 | (8 461) | (5 772) |
+-----------------------------------------------+-------+--------------+--------------+
| Operating loss before finance costs and | | (79 265) | (18 664) |
| taxation | | | |
+-----------------------------------------------+-------+--------------+--------------+
| | | | |
+-----------------------------------------------+-------+--------------+--------------+
| Finance income | 9 | 341 | 1 348 |
+-----------------------------------------------+-------+--------------+--------------+
| Finance expenses | 9 | (140) | (2 563) |
+-----------------------------------------------+-------+--------------+--------------+
| Net financing costs | | 201 | (1 215) |
+-----------------------------------------------+-------+--------------+--------------+
| Loss before taxation | | (79 064) | (19 879) |
+-----------------------------------------------+-------+--------------+--------------+
| | | | |
+-----------------------------------------------+-------+--------------+--------------+
| Taxation | 10 | 2 390 | 470 |
+-----------------------------------------------+-------+--------------+--------------+
| Loss for the period | | (76 674) | (19 409) |
+-----------------------------------------------+-------+--------------+--------------+
| - attributable to outside equity | | (4 181) | (3 412) |
| shareholders | | | |
+-----------------------------------------------+-------+--------------+--------------+
| - attributable to equity shareholders of | | (72 493) | (15 997) |
| Namakwa Diamonds Limited | | | |
+-----------------------------------------------+-------+--------------+--------------+
| | | | |
+-----------------------------------------------+-------+--------------+--------------+
| Basic loss per ordinary share for the period | 16 | (0.61) | (0.23) |
| (dollars) | | | |
+-----------------------------------------------+-------+--------------+--------------+
| Diluted loss per ordinary share for the | 16 | (0.61) | (0.23) |
| period (dollars) | | | |
+-----------------------------------------------+-------+--------------+--------------+
| Paid and proposed dividends | - | - | - |
+-----------------------------------------------+-------+--------------+--------------+
Consolidated balance sheet
+------------------------------------------------+------+-------------+--------------+
| | | As at |
+------------------------------------------------+------+----------------------------+
| | |28 February | 31 Aug |
+------------------------------------------------+------+-------------+--------------+
| In thousands of US dollars | Note | 2009 | 2008 |
+------------------------------------------------+------+-------------+--------------+
| | | Unaudited | Audited |
+------------------------------------------------+------+-------------+--------------+
| | | | |
+------------------------------------------------+------+-------------+--------------+
| Assets | | | |
+------------------------------------------------+------+-------------+--------------+
| Property, plant and equipment | 11 | 38 455 | 66 952 |
+------------------------------------------------+------+-------------+--------------+
| Goodwill | 4 | - | 4 572 |
+------------------------------------------------+------+-------------+--------------+
| Total non-current assets | | 38 455 | 71 524 |
+------------------------------------------------+------+-------------+--------------+
| | | | |
+------------------------------------------------+------+-------------+--------------+
| Inventories | 12 | 22 785 | 49 210 |
+------------------------------------------------+------+-------------+--------------+
| Trade and other receivables | | 7 970 | 16 090 |
+------------------------------------------------+------+-------------+--------------+
| Cash and cash equivalents | | 21 395 | 52 020 |
+------------------------------------------------+------+-------------+--------------+
| Total current assets | | 52 150 | 117 320 |
+------------------------------------------------+------+-------------+--------------+
| Total assets | | 90 605 | 188 844 |
+------------------------------------------------+------+-------------+--------------+
| | | | |
+------------------------------------------------+------+-------------+--------------+
| Equity | | | |
+------------------------------------------------+------+-------------+--------------+
| Capital and reserves attributable to the | | | |
| equity holders of the Company | | | |
+------------------------------------------------+------+-------------+--------------+
| Issued capital | 13 | 74 | 74 |
+------------------------------------------------+------+-------------+--------------+
| Share premium | 13 | 229 727 | 227 131 |
+------------------------------------------------+------+-------------+--------------+
| Reserves | 13 | (13 544) | (1 967) |
+------------------------------------------------+------+-------------+--------------+
| Accumulated loss | | (137 331) | (64 691) |
+------------------------------------------------+------+-------------+--------------+
| Total | | 78 926 | 160 547 |
+------------------------------------------------+------+-------------+--------------+
| Minority interest in equity | | 4 555 | 12 020 |
+------------------------------------------------+------+-------------+--------------+
| Total equity | | 83 481 | 172 567 |
+------------------------------------------------+------+-------------+--------------+
| | | | |
+------------------------------------------------+------+-------------+--------------+
| Liabilities | | | |
+------------------------------------------------+------+-------------+--------------+
| Interest-bearing loans and borrowings | 17 | 1 000 | 1 598 |
+------------------------------------------------+------+-------------+--------------+
| Provisions | | 2 379 | 3 003 |
+------------------------------------------------+------+-------------+--------------+
| Deferred tax liabilities | 10 | 466 | 3 547 |
+------------------------------------------------+------+-------------+--------------+
| Total non-current liabilities | | 3 845 | 8 148 |
+------------------------------------------------+------+-------------+--------------+
| | | | |
+------------------------------------------------+------+-------------+--------------+
| Trade and other payables | | 2 747 | 7 486 |
+------------------------------------------------+------+-------------+--------------+
| Short term portion of interest-bearing | 17 | 489 | 586 |
| loans and borrowings | | | |
+------------------------------------------------+------+-------------+--------------+
| Tax liabilities | | 43 | 57 |
+------------------------------------------------+------+-------------+--------------+
| Total current liabilities | | 3 279 | 8 129 |
+------------------------------------------------+------+-------------+--------------+
| Total liabilities | | 7 124 | 16 277 |
+------------------------------------------------+------+-------------+--------------+
| Total equity and liabilities | | 90 605 | 188 844 |
+------------------------------------------------+------+-------------+--------------+
Consolidated statement of changes in equity
+-----------------------------------------------+--------+---------+----------+-------------+---------+-------------+--------------+-----------+----------+
| In thousands of US dollars | | Share | Share |Translation | Share |Accumulated | Total | Minority | Total |
| | |capital | premium | reserve | based | Loss | equity |interests | equity |
| | | | | |payment | | attributable | | |
| | | | | |reserve | | to ordinary | | |
| | | | | | | | shareholders | | |
+-----------------------------------------------+--------+---------+----------+-------------+---------+-------------+--------------+-----------+----------+
| Six months ended 28 February 2009 | | | | | | | | | |
| (Unaudited): | | | | | | | | | |
+-----------------------------------------------+--------+---------+----------+-------------+---------+-------------+--------------+-----------+----------+
| Balance at 1 September 2008 | | 74 | 227 131 | (4 165) | 2 198 | (64 691) | 160 547 | 12 020 | 172 567 |
+-----------------------------------------------+--------+---------+----------+-------------+---------+-------------+--------------+-----------+----------+
| Shares issued | Note | - | 2 596 | - | - | - | 2 596 | - | 2 596 |
| | 13 | | | | | | | | |
+-----------------------------------------------+--------+---------+----------+-------------+---------+-------------+--------------+-----------+----------+
| Exercise of awards | | - | - | - | 617 | - | 617 | - | 617 |
+-----------------------------------------------+--------+---------+----------+-------------+---------+-------------+--------------+-----------+----------+
| Issue of 'A' shares | | - | - | - | - | - | - | 290 | 290 |
+-----------------------------------------------+--------+---------+----------+-------------+---------+-------------+--------------+-----------+----------+
| Repurchase of 'A' shares | | - | - | - | - | - | - | (3 087) | (3 087) |
+-----------------------------------------------+--------+---------+----------+-------------+---------+-------------+--------------+-----------+----------+
| Change on translation of foreign operations | | - | - | (12 828) | - | - | (12 828) | - | (12 828) |
+-----------------------------------------------+--------+---------+----------+-------------+---------+-------------+--------------+-----------+----------+
| Loss for the year | | - | - | - | - | (72 493) | (72 493) | (4 181) | (76 674) |
+-----------------------------------------------+--------+---------+----------+-------------+---------+-------------+--------------+-----------+----------+
| | Note | 74 | 229 727 | (16 993) | 2 815 | (137 184) | 78 439 | 5 042 | 83 481 |
| | 13 | | | | | | | | |
+-----------------------------------------------+--------+---------+----------+-------------+---------+-------------+--------------+-----------+----------+
| Gain/ (loss) arising from impact on minority | | - | - | 632 | | (147) | 487 | (487) | - |
| interest of the above equity transactions | | | | | 2 | | | | |
+-----------------------------------------------+--------+---------+----------+-------------+---------+-------------+--------------+-----------+----------+
| Balance at 28 February 2009 | | 74 | 229 727 | (16 361) | 2 817 | (137 331) | 78 926 | 4 555 | 83 481 |
+-----------------------------------------------+--------+---------+----------+-------------+---------+-------------+--------------+-----------+----------+
| | | | | | | | | | |
+-----------------------------------------------+--------+---------+----------+-------------+---------+-------------+--------------+-----------+----------+
| Six months ended 29 February 2008 | | | | | | | | | |
| (Unaudited): | | | | | | | | | |
+-----------------------------------------------+--------+---------+----------+-------------+---------+-------------+--------------+-----------+----------+
| Balance at 1 September 2007 | | 24 | 11 203 | 33 | 822 | (11 977) | 105 | 28 | 133 |
+-----------------------------------------------+--------+---------+----------+-------------+---------+-------------+--------------+-----------+----------+
| Shares issued | | 31 | 172 133 | - | - | - | 172 164 | - | 172 164 |
+-----------------------------------------------+--------+---------+----------+-------------+---------+-------------+--------------+-----------+----------+
| Value of services provided | | - | - | - | 1 835 | - | 1 835 | - | 1 835 |
+-----------------------------------------------+--------+---------+----------+-------------+---------+-------------+--------------+-----------+----------+
| Exercise of awards | | 1 | 1 152 | - | (1 153) | - | - | - | - |
+-----------------------------------------------+--------+---------+----------+-------------+---------+-------------+--------------+-----------+----------+
| Conversion of preference shares | | 18 | 42 850 | - | - | - | 42 868 | - | 42 868 |
+-----------------------------------------------+--------+---------+----------+-------------+---------+-------------+--------------+-----------+----------+
| Repurchase of 'A' shares | | - | - | - | - | - | - | (865) | (865) |
+-----------------------------------------------+--------+---------+----------+-------------+---------+-------------+--------------+-----------+----------+
| Minorities arising from business combinations | | - | - | - | - | - | - | 226 | 226 |
+-----------------------------------------------+--------+---------+----------+-------------+---------+-------------+--------------+-----------+----------+
| Change on translation of foreign operations | | - | - | (2 467) | - | - | (2 467) | - | (2 467) |
+-----------------------------------------------+--------+---------+----------+-------------+---------+-------------+--------------+-----------+----------+
| Loss for the year | | - | - | - | - | (15 997) | (15 997) | (3 412) | (19 409) |
+-----------------------------------------------+--------+---------+----------+-------------+---------+-------------+--------------+-----------+----------+
| | Note | 74 | 227 338 | (2 434) | 1 504 | (27 974) | 198 508 | (4 023) | 194 485 |
| | 13 | | | | | | | | |
+-----------------------------------------------+--------+---------+----------+-------------+---------+-------------+--------------+-----------+----------+
| Gain/ (loss) arising from impact on minority | | - | - | 175 | (107) | (18 260) | (18 192) | 18 192 | - |
| interest of the above equity transactions | | | | | | | | | |
+-----------------------------------------------+--------+---------+----------+-------------+---------+-------------+--------------+-----------+----------+
| Balance at 31 August 2008 | | 74 | 227 338 | (2 259) | 1 397 | (46 234) | 180 316 | 14 169 | 194 485 |
+-----------------------------------------------+--------+---------+----------+-------------+---------+-------------+--------------+-----------+----------+
Consolidated statement of cash flows
+--------------------------------------------------+-------+-------------+-------------+
| In thousands of US dollars | Note |6 Months to |6 Months to |
| | |28 February |29 February |
+--------------------------------------------------+-------+-------------+-------------+
| | | 2009 | 2008 |
+--------------------------------------------------+-------+-------------+-------------+
| | | Unaudited | Unaudited |
+--------------------------------------------------+-------+-------------+-------------+
| | | | |
+--------------------------------------------------+-------+-------------+-------------+
| Cash flows from operating activities | | | |
+--------------------------------------------------+-------+-------------+-------------+
| Loss for the year before tax | | (79 064) | (19 879) |
+--------------------------------------------------+-------+-------------+-------------+
| Adjustments for: | | | |
+--------------------------------------------------+-------+-------------+-------------+
| Depreciation | 5,7 | 1 833 | 2 091 |
+--------------------------------------------------+-------+-------------+-------------+
| Acquired exploration assets expense | | 216 | 4 204 |
+--------------------------------------------------+-------+-------------+-------------+
| Impairment of inventories | | 32 116 | - |
+--------------------------------------------------+-------+-------------+-------------+
| Net finance (income)/expense | | (201) | 1 215 |
+--------------------------------------------------+-------+-------------+-------------+
| Loss/(profit) on disposal of property, plant and | | 264 | (48) |
| equipment | | | |
+--------------------------------------------------+-------+-------------+-------------+
| Equity settled share-based payment transactions | | 617 | 2 635 |
+--------------------------------------------------+-------+-------------+-------------+
| Impairment of non-financial assets | | 27 615 | - |
+--------------------------------------------------+-------+-------------+-------------+
| Foreign exchange rate differences | | 1 205 | - |
+--------------------------------------------------+-------+-------------+-------------+
| | | (15 399) | (9 782) |
+--------------------------------------------------+-------+-------------+-------------+
| | | | |
+--------------------------------------------------+-------+-------------+-------------+
| Change in inventories | | (8 163) | (4 653) |
+--------------------------------------------------+-------+-------------+-------------+
| Change in trade and other receivables | | 8 120 | (1 081) |
+--------------------------------------------------+-------+-------------+-------------+
| Change in trade and other payables | | (4 739) | (908) |
+--------------------------------------------------+-------+-------------+-------------+
| Change in provisions | | 54 | 538 |
+--------------------------------------------------+-------+-------------+-------------+
| Net cash outflows from operations | | (20 127) | (15 886) |
+--------------------------------------------------+-------+-------------+-------------+
| Interest paid | | (140) | (1 464) |
+--------------------------------------------------+-------+-------------+-------------+
| Income taxes paid | | (14) | (150) |
+--------------------------------------------------+-------+-------------+-------------+
| Net cash used in operating activities | | (20 281) | (17 500) |
+--------------------------------------------------+-------+-------------+-------------+
| | | | |
+--------------------------------------------------+-------+-------------+-------------+
| Cash flows from investing activities | | | |
+--------------------------------------------------+-------+-------------+-------------+
| Interest received | | 341 | 1 348 |
+--------------------------------------------------+-------+-------------+-------------+
| Acquisition of subsidiaries, net of cash | | - | (2 674) |
| acquired | | | |
+--------------------------------------------------+-------+-------------+-------------+
| Acquisition of property, plant and equipment | | (7 485) | (13 218) |
+--------------------------------------------------+-------+-------------+-------------+
| Acquisition of exploration assets | | (3 488) | - |
+--------------------------------------------------+-------+-------------+-------------+
| Proceeds from disposal of property, plant and | | 2 679 | 87 |
| equipment | | | |
+--------------------------------------------------+-------+-------------+-------------+
| Net cash used in investing activities | | (7 953) | (14 457) |
+--------------------------------------------------+-------+-------------+-------------+
| | | | |
+--------------------------------------------------+-------+-------------+-------------+
| Cash flows from financing activities | | | |
+--------------------------------------------------+-------+-------------+-------------+
| Proceeds from the issue of share capital | | 2 596 | 171 365 |
+--------------------------------------------------+-------+-------------+-------------+
| Buy back of A Shares | | (3 087) | (865) |
+--------------------------------------------------+-------+-------------+-------------+
| Repayment of borrowings | | (1 900) | (4 692) |
+--------------------------------------------------+-------+-------------+-------------+
| Buy back of preference shares | | - | (1 683) |
+--------------------------------------------------+-------+-------------+-------------+
| Net cash from financing activities | | (2 391) | 164 125 |
+--------------------------------------------------+-------+-------------+-------------+
| | | | |
+--------------------------------------------------+-------+-------------+-------------+
| Net (decrease)/increase in cash and cash | | (30 625) | 132 168 |
| equivalents | | | |
+--------------------------------------------------+-------+-------------+-------------+
| Cash and cash equivalents at the beginning of | | 52 020 | 6 411 |
| the period | | | |
+--------------------------------------------------+-------+-------------+-------------+
| Cash and cash equivalents at 28 February 2009 | | 21 395 | 138 579 |
+--------------------------------------------------+-------+-------------+-------------+
Notes to the consolidated financial statements
1. Reporting entity
Namakwa Diamonds Limited (the "Company") is a company that was incorporated in
Bermuda on 20 October 2006. The address of the Company's registered office is
Clarendon House, 2 Church Street, Hamilton. The consolidated financial
statements of the Company have been prepared for the six months ended 28
February 2009 and comprise the Company and its subsidiaries (together referred
to as the "Group" and individually as "Group entities").
Since incorporation the Company has acquired a number of exploration and
development assets and entities involved in the exploration, development and
sale of diamonds. Following these acquisitions the Group is primarily involved
in the exploration, mining, trading and sale of diamonds. The Group's current
operating mines are located in South Africa and the principal locations of its
exploration and development projects are South Africa, the Democratic Republic
of Congo, Angola and Namibia.
The Company has a primary listing on the London stock exchange.
The Group consolidated financial statements were authorised for issue by the
Board of Directors on 28 April 2009.
2. Accounting policies
The interim results, which are reviewed, have been prepared in accordance with
International Financial Reporting Standards (IFRS) and International Financial
Reporting Interpretations Committee (IFRIC) interpretations. The interim
financial statements have been prepared in accordance with the requirements of
International Accounting Standard 34. This interim report does not include all
the notes of the type normally included in an annual financial report.
Accordingly, this report is to be read in conjunction with the consolidated
financial information for the year ended 31 August 2008 and any public
announcements made by the Company during the interim reporting period. The
accounting policies applied are consistent with those of the annual financial
statements for the year ended 31 August 2008, as described in those annual
financial statements.
The interim financial statements for the six months ended 28 February 2009
do not constitute statutory accounts and have been drawn up using accounting
policies and presentation consistent with those applied in the financial
information presented in the annual financial statements for the period ended 31
August 2008.The independent auditor's report for the year ended 31 August 2008
was unqualified.
(a) New standards and interpretations not yet adopted
A number of new standards, amendments to standards and interpretations are
not yet effective for the interim review period ended 28 February 2009, and have
not been applied in preparing the consolidated financial statements:
* IAS 23 - Borrowing Costs - Revised (effective for years beginning on or after 1
January 2009)
* The main change from the previous version of IAS 23 is the removal of the option
of immediately recognising as an expense borrowing costs that relate to assets
that take a substantial period of time to get ready for use or sale.
* IAS 1 - Presentation of Financial Statements - Revised (effective for years
beginning on or after 1 January 2009)
* The revised IAS 1 requires information in financial statements to be aggregated
on the basis of shared characteristics and to introduce a statement of
comprehensive income. This will enable readers to analyse changes in a company's
equity resulting from transactions with owners in their capacity as owners
separately from 'non-owner' changes. The revisions include changes in the titles
of some of the financial statements to reflect their function more clearly (for
example, the balance sheet is renamed a statement of financial position). The
new titles are not mandatory for use in financial statements.
* IFRS 1 and IAS 27 (Amendment) - Cost of an investment in a subsidiary, jointly
controlled entity or associate (January 2009) When an entity adopts IFRS for the
first-time, an exemption is added to IFRS 1 that will allow investments in
subsidiaries, jointly controlled entities and associates to be measured at cost,
deemed cost or previous GAAP carrying amount.
* IFRS 2 (Amendment): Share-based Payments - Vesting conditions and Cancellations
(1 January 2009) The amendment deals with two matters. It clarifies that vesting
conditions are service conditions and performance conditions only. Other
features of a share-based payment are not vesting conditions. It also specifies
that all cancellations, whether by the entity or by other parties, should
receive the same accounting treatment.
* IAS 27 - Consolidated financial statements and accounting for investments in
subsidiaries (1 July 2009) IAS 27 (revised) requires the effects of all
transactions with non-controlling interests to be recorded in equity if there is
no change in control. They will no longer result in goodwill or gains and
losses. The standard also specifies the accounting when control is lost. Any
remaining interest in the entity is re-measured to fair value and a gain or loss
is recognised in profit or loss.
* IAS 39 (Amendment): Financial Instruments: Recognition and measurement -
Eligible Hedged Items (1 July 2009) The amendment clarifies how the existing
principles underlying hedge accounting should be applied in the designation of:
a one-sided risk in a hedged item; and inflation in a financial hedged item.
* IFRS 3 (Revised) - Business combinations (1 July 2009) The new standard
continues to apply the acquisition method to business combinations, with some
significant changes. For example, all payments to purchase a business are to be
recorded at fair value at the acquisition date, with some contingent payments
subsequently re-measured at fair value through income. Goodwill may be
calculated based on the parent's share of net assets or it may include goodwill
related to the minority interest. All transaction costs will be expensed.
* IFRIC 13 - Customer Loyalty Programmes (1 July 2008) IFRIC 13 addresses
accounting by entities that grant loyalty award credits to customers who buy
other goods or services. Specifically, it explains how such entities should
account for their obligations to provide free or discounted goods or services to
customers who redeem award credits.
* IFRIC 15 - Agreements for the construction of real estate (1 January 2009) The
IFRIC was issued to address diversity in accounting for real estate sales. Some
entities recognise revenue when risks and rewards in the real estate are
transferred in accordance with IAS 18: Revenue and others recognise revenue as
the real estate is developed in accordance with IAS 11: Construction Contracts.
The interpretation clarifies which standard should be applied to particular
transactions. The guidance is not limited to real estate sales but can be
applied by analogy in other circumstances to determine whether a transaction is
accounted for as a sale of a good (IAS 18) or a construction contract (IAS 11).
* IFRIC 16 - Hedges of a net investment in a foreign operation (1 October 2008)
This interpretation addresses three issues: the nature of the hedged risk and
amount of the hedged item for which a hedging relationship may be designated;
where in a group the hedging instrument can be held; and what amounts should be
reclassified from equity to profit and loss as reclassification adjustments on
disposal of the foreign operation.
* IFRIC 17 - Distribution of Non-cash Assets (1 July 2009) This interpretation
claries that: (1) A dividend payable should be recognised when the dividend is
appropriately authorised and is no longer at the discretion of the entity; (2)
An entity should measure the dividend payable at the fair value of the net
assets to be distributed; and (3) An entity should recognise the difference
between the dividend paid and the carrying amount of the net assets distributed
in profit and loss. The interpretation also requires an entity to provide
additional disclosure if the net assets being held for distribution to owners
meet the definition of a discontinued operation. The interpretation does not
apply to common control transactions.
* IFRIC 18 - Transfers of Assets from Customers (Transfers of assets from
customers received on or after 1 July 2009) This interpretation applies to
agreements in which an entity receives from a customer an item of property,
plant and equipment that the entity must then use either to connect the customer
to a network or to provide the customer with ongoing access to a supply of goods
or services (such as a supply of electricity, gas or water). In some cases, the
entity receives cash from a customer which must be used only to acquire or
construct the item of property, plant and equipment in order to connect the
customer to a network or provide the customer with ongoing access to a supply of
goods or services (or to do both). The interpretation clarifies: (1) the
circumstances in which the definition of an asset is met; (2) the recognition of
the asset and the measurement of its cost on initial recognition; (3) the
identification of the separately identifiable services (one or more services in
exchange for the transferred asset); (4) the recognition of revenue; and (5) the
accounting for transfers of cash from customers.
* Improvements to IFRSs ('Generally' 1 January 2009) Improvements to IFRS is a
collection of amendments to International Financial Reporting Standards (IFRSs).
These amendments are the result of conclusions the Board reached on proposals
made in its annual improvements project. Unless otherwise specified the
amendments are effective for annual accounting periods beginning on or after 1
January 2009, although entities are permitted to adopt them earlier.
Management does not expect the above amendments to have a significant impact on
the group.
(b) New standards and interpretations applied but not yet effective
IFRS 8: Operating Segments statement together with its amendments were applied
for the first time for the period ended 31 August 2007 and have been applied in
the preparation of the consolidated financial statements. IFRS 8 requires
disclosure regarding the nature and financial effect of the business activities
in which the Group engages and the economic environment in which the Group
operates. The effective date for incorporating this statement is for annual
periods beginning on or after 1 January 2009.
(c) Standards, interpretations and amendments to published standards
effective for the period
During the financial year, the following new and revised accounting standards,
amendments to standards and new interpretations were adopted by the Group:
IFRIC 12 Service concession arrangements
IFRIC 14 IAS 19 - The limit on a Defined Benefit Asset minimum funding
requirements and their interaction
Amendment to IAS 39 and IFRS 7 - Amendments to IAS 39 - Financial Instruments:
Recognition and Measurement and IFRS 7 Financial Instruments: Disclosures -
Reclassification of Financial Assets. The amendments introduces the
possibility of reclassifications for certain financial assets previously
classified as 'held for trading' or 'available for sale' to another category
under limited circumstances. Various disclosures are required where a
reclassification has been made. Derivatives and assets designated as 'at fair
value through profit or loss' under the fair value option are not eligible for
this reclassification.
3. Segment reporting
Operating segments
The Group comprises the following operating segments:
Exploration : Exploration includes all exploration and development
projects up to the stage where a project commences production at which point it
will form part of the Mining segment.
?Mining : Mining includes all diamond mining operations. All mined
diamonds are sold to the beneficiation segment.
Beneficiation :Beneficiation includes the purchase of diamonds from the
mining segment and external sources, and all revenue from the sale of these
beneficiated and mined diamonds.
In presenting information on the basis of operating segments, segment revenue is
based on the results from each operation. Segment assets are based on the
operation in which they are used.
28 February 2009(Unaudited):
+----------------------------------+----------+----------+-----+---------------+----------+-----------+
| | Mining | Exploration |Beneficiation | Other | Total |
+----------------------------------+----------+----------------+---------------+----------+-----------+
| In thousands of US dollars | | | | | |
+----------------------------------+----------+----------+---------------------+----------+-----------+
| | | | | | |
+----------------------------------+----------+----------+---------------------+----------+-----------+
| Total revenue from external | - | - | 7 835 | - | 7 835 |
| customers | | | | | |
+----------------------------------+----------+----------+---------------------+----------+-----------+
| Inter-segment revenue | 3 929 | - | - | - | 3 929 |
+----------------------------------+----------+----------+---------------------+----------+-----------+
| | | | | | |
+----------------------------------+----------+----------+---------------------+----------+-----------+
| Finance income | 15 | - | 26 | 299 | 341 |
+----------------------------------+----------+----------+---------------------+----------+-----------+
| Finance expense | (130) | (2) | (3) | (6) | (140) |
+----------------------------------+----------+----------+---------------------+----------+-----------+
| Depreciation and amortisation | (1 359) | (382) | (44) | (48) | (1 833) |
+----------------------------------+----------+----------+---------------------+----------+-----------+
| Impairment of non-financial | (26 901) | (401) | (313) | - | (27 615) |
| assets | | | | | |
+----------------------------------+----------+----------+---------------------+----------+-----------+
| Segment (loss) before tax | (35 093) | (7 431) | (31 554) | (4 986) | (79 064) |
+----------------------------------+----------+----------+---------------------+----------+-----------+
| Taxation | 2 383 | - | 7 | - | 2 390 |
+----------------------------------+----------+----------+---------------------+----------+-----------+
| Segment (loss) after tax | (32 710) | (7 431) | (31 547) | (4 986) | (76 674) |
+----------------------------------+----------+----------+---------------------+----------+-----------+
| | | | | | |
+----------------------------------+----------+----------+---------------------+----------+-----------+
| Reportable segment assets | 21 731 | 19 319 | 48 692 | 863 | 90 605 |
+----------------------------------+----------+----------+---------------------+----------+-----------+
| Capital expenditure | 2 341 | 5 079 | 15 | 49 | 7 485 |
+----------------------------------+----------+----------+---------------------+----------+-----------+
| Reportable segment liabilities | 4 387 | 1 100 | 1 109 | 528 | 7 124 |
+----------------------------------+----------+----------+-----+---------------+----------+-----------+
The following results are reportable in terms of geographical segments:
+----------------------------------+---------+----------+----------+----------+
| | South | Other | Other | Total |
| | Africa | Africa | | |
+----------------------------------+---------+----------+----------+----------+
| In thousands of US dollars | | | | |
+----------------------------------+---------+----------+----------+----------+
| | | | | |
+----------------------------------+---------+----------+----------+----------+
| Total revenue from external | 5 078 | - | 2 757 | 7 835 |
| customers | | | | |
+----------------------------------+---------+----------+----------+----------+
| Reportable net assets | 26 128 | 18 183 | 39 170 | 83 481 |
+----------------------------------+---------+----------+----------+----------+
29 February 2008 (Unaudited):
+----------------------------------+----------+-------------+---------------+----------+-----------+
| | Mining |Exploration |Beneficiation | Other | Total |
+----------------------------------+----------+-------------+---------------+----------+-----------+
| In thousands of US dollars | | | | | |
+----------------------------------+----------+-------------+---------------+----------+-----------+
| | | | | | |
+----------------------------------+----------+-------------+---------------+----------+-----------+
| Total revenue from external | - | - | 12 426 | - | 12 426 |
| customers | | | | | |
+----------------------------------+----------+-------------+---------------+----------+-----------+
| Inter-segment revenue | 6 579 | - | - | - | 6 579 |
+----------------------------------+----------+-------------+---------------+----------+-----------+
| | | | | | |
+----------------------------------+----------+-------------+---------------+----------+-----------+
| | | | | | |
+----------------------------------+----------+-------------+---------------+----------+-----------+
| Finance income | 2 | - | 21 | 1 325 | 1 348 |
+----------------------------------+----------+-------------+---------------+----------+-----------+
| Finance expense | (13) | (4) | (4) | (2 542) | (2 563) |
+----------------------------------+----------+-------------+---------------+----------+-----------+
| Depreciation and amortisation | (1 886) | (4 392) | (18) | - | (6 296) |
+----------------------------------+----------+-------------+---------------+----------+-----------+
| Segment (loss)/profit before | (3 525) | (7 074) | 596 | (9 876) | (19 879) |
| income tax | | | | | |
+----------------------------------+----------+-------------+---------------+----------+-----------+
| Taxation | 470 | - | - | - | 470 |
+----------------------------------+----------+-------------+---------------+----------+-----------+
| | | | | | |
+----------------------------------+----------+-------------+---------------+----------+-----------+
| Reportable segment assets | 51 081 | 1 267 | 16 368 | 141 062 | 209 778 |
+----------------------------------+----------+-------------+---------------+----------+-----------+
| Capital expenditure | 10 425 | 1 433 | 140 | 64 | 12 062 |
+----------------------------------+----------+-------------+---------------+----------+-----------+
| Reportable segment liabilities | (10 046) | - | (406) | (4 841) | (15 293) |
+----------------------------------+----------+-------------+---------------+----------+-----------+
The following results are reportable in terms of geographical segments:
+----------------------------------+---------+----------+----------+----------+-------+
| | South | Other | Other | Total |
| | Africa | Africa | | |
+----------------------------------+---------+----------+----------+----------+
| In thousands of US dollars | | | | |
+----------------------------------+---------+----------+----------+------------------+
| | | | | |
+----------------------------------+---------+----------+----------+------------------+
| Total revenue from external | 9 926 | - | 2 500 | 12 426 |
| customers | | | | |
+----------------------------------+---------+----------+----------+------------------+
| Reportable net assets | 56 408 | 1 267 | 136 810 | 194 485 |
+----------------------------------+---------+----------+----------+----------+-------+
4. Impairment
Impairment testing of all assets has been performed in accordance with the Group
Accounting Policy and certain non-financial assets are deemed to be impaired due
to the unfavourable current diamond market.
In accordance with the Group Accounting policy a non-financial asset is
considered to be impaired if objective evidence indicates that one or more
events have had a negative effect on the recoverable amount of that asset. The
recoverable amount of an asset or cash-generating unit is the greater of its
value in use and its fair value less costs to sell. In assessing values in use,
the estimated future cash flows are discounted to their present value using a
pre-tax discount rate that reflects current market assessments of the time value
of money and the risks specific to the asset.
An impairment loss in respect of a non-financial asset is calculated as the
difference between its carrying amount and its recoverable amount. All
impairment losses are recognised in the income statement. An impairment loss is
reversed if the reversal can be related objectively to an event occurring after
the impairment loss was recognised. An impairment loss in respect of goodwill is
not reversed.
Management's process of calculating the impairment included the following
factors and assumptions:
Diamond Prices:
Diamonds are not openly traded as a commodity in a metals exchange, rather, they
are sold based on tenders or private sales and the price of each diamond is
based on its size, colour, clarity and character. Currently, demand for diamonds
is below the same time last year by about 30% to 50%. This situation is not
expected to change in the near future.
Nature of assets carried:
Decisions for impairment were partly based on the nature of the asset and the
cash generating unit where the asset is housed.
Resources and reserves:
Decisions for impairment were based on the expected carats and grades
recoverable, expected costs to achieve this and expected revenues.
Volatile world economy:
Volatility in current market conditions makes any predictions for future
developments very difficult. Therefore conservative estimates and safety margins
in assumptions were necessary in making impairment calculations.
Management calculated the recoverable amount of all non-financial assets using
its fair value less costs to sell. This calculation was performed taking into
account experience in the diamond industry, current diamond market conditions
and other factors as described above.
The following non-financial asset impairments were recognised in operating
expenses:
Goodwill write-downs:
+-----------------------------------------------------+-------+------+-----------+---------+
| In thousands of US dollars | | | | |
+-----------------------------------------------------+-------+------+-----------+---------+
| | | | 2009 | 2008 |
+-----------------------------------------------------+-------+------+-----------+---------+
| | | |Unaudited |Audited |
+-----------------------------------------------------+-------+------+-----------+---------+
| | | | | |
+-----------------------------------------------------+-------+------+-----------+---------+
| North West Mining Operations | | | 3 441 | - |
+-----------------------------------------------------+-------+------+-----------+---------+
| Diamond Polishing Operations | | | 313 | - |
+-----------------------------------------------------+-------+------+-----------+---------+
| | | | 3 754 | - |
+-----------------------------------------------------+-------+------+-----------+---------+
Reconciliation of Goodwill:
+-----------------------------------------------------+-------+------+-----------+---------+
| In thousands of US dollars | | | | |
+-----------------------------------------------------+-------+------+-----------+---------+
| | | | 2009 | 2008 |
+-----------------------------------------------------+-------+------+-----------+---------+
| | | |Unaudited |Audited |
+-----------------------------------------------------+-------+------+-----------+---------+
| | | | | |
+-----------------------------------------------------+-------+------+-----------+---------+
| Opening Balance | | | 4 572 | 4 152 |
+-----------------------------------------------------+-------+------+-----------+---------+
| Impairment | | | (3 754) | - |
+-----------------------------------------------------+-------+------+-----------+---------+
| Foreign Currency Translation Reserve | | | (818) | 420 |
+-----------------------------------------------------+-------+------+-----------+---------+
| | | | | |
+-----------------------------------------------------+-------+------+-----------+---------+
| | | | - | 4 572 |
+-----------------------------------------------------+-------+------+-----------+---------+
Undeveloped Properties and Mineral Rights write downs:
+-----------------------------------------------------+-------+------+-----------+---------+
| In thousands of US dollars | | | | |
+-----------------------------------------------------+-------+------+-----------+---------+
| | | | 2009 | 2008 |
+-----------------------------------------------------+-------+------+-----------+---------+
| | | |Unaudited |Audited |
+-----------------------------------------------------+-------+------+-----------+---------+
| | | | | |
+-----------------------------------------------------+-------+------+-----------+---------+
| North West Mining Operations | | | 19 986 | - |
+-----------------------------------------------------+-------+------+-----------+---------+
Impairment of investment in Idada Trading 167 (Pty) Ltd:
+-----------------------------------------------------+-------+------+-----------+---------+
| In thousands of US dollars | | | | |
+-----------------------------------------------------+-------+------+-----------+---------+
| | | | 2009 | 2008 |
+-----------------------------------------------------+-------+------+-----------+---------+
| | | |Unaudited |Audited |
+-----------------------------------------------------+-------+------+-----------+---------+
| | | | | |
+-----------------------------------------------------+-------+------+-----------+---------+
| North West Mining Operations | | | 3 488 | - |
+-----------------------------------------------------+-------+------+-----------+---------+
On 5 September 2008 the Group acquired the alluvial diamond mining going concern
of Idada Trading 167 (Pty) Ltd for the consideration of US$3,487,556. The
purchase consideration was based on the result of a due diligence on the
underlying value in the resources of the business. Due to the fact that these
values cannot be accurately estimated and that no mining activities are planned
in the foreseeable future, the Group has decided to impair this asset.
Impairment of Plant and Equipment:
+-----------------------------------------------------+-------+------+-----------+---------+
| In thousands of US dollars | | | | |
+-----------------------------------------------------+-------+------+-----------+---------+
| | | | 2009 | 2008 |
+-----------------------------------------------------+-------+------+-----------+---------+
| | | |Unaudited |Audited |
+-----------------------------------------------------+-------+------+-----------+---------+
| | | | | |
+-----------------------------------------------------+-------+------+-----------+---------+
| North West Mining Operations | | | 387 | - |
+-----------------------------------------------------+-------+------+-----------+---------+
Total Impairment Write Downs:
+-----------------------------------------------------+-------+------+-----------+---------+
| In thousands of US dollars | | | | |
+-----------------------------------------------------+-------+------+-----------+---------+
| | | | 2009 | 2008 |
+-----------------------------------------------------+-------+------+-----------+---------+
| | | |Unaudited |Audited |
+-----------------------------------------------------+-------+------+-----------+---------+
| | | | | |
+-----------------------------------------------------+-------+------+-----------+---------+
| | | | 27 615 | - |
+-----------------------------------------------------+-------+------+-----------+---------+
5. Cost of Sales
+-----------------------------------------------------------------------+----------+--+--------------+-------------+
| In thousands of US dollars | | | | |
+-----------------------------------------------------------------------+----------+--+--------------+-------------+
| | | | 2009 | 2008 |
+-----------------------------------------------------------------------+----------+--+--------------+-------------+
| | | | Unaudited | Unaudited |
+-----------------------------------------------------------------------+----------+--+--------------+-------------+
| | | | | |
+-----------------------------------------------------------------------+----------+--+--------------+-------------+
| Cost of inventory sold | | | 6 800 | 4 723 |
+-----------------------------------------------------------------------+----------+--+--------------+-------------+
| Inventory write down to Net Realisable Value | | | 32 116 | - |
+-----------------------------------------------------------------------+----------+--+--------------+-------------+
| Depreciation relating to operations | | | 1 082 | 1 873 |
+-----------------------------------------------------------------------+----------+--+--------------+-------------+
| Electricity and water | | | 120 | 94 |
+-----------------------------------------------------------------------+----------+--+--------------+-------------+
| Equipment rental | | | 117 | 414 |
+-----------------------------------------------------------------------+----------+--+--------------+-------------+
| Fuel and lubricants | | | 1 081 | 2 614 |
+-----------------------------------------------------------------------+----------+--+--------------+-------------+
| Motor vehicle expenses | | | 49 | 73 |
+-----------------------------------------------------------------------+----------+--+--------------+-------------+
| Personnel expenses | | | 1 649 | 2 121 |
+-----------------------------------------------------------------------+----------+--+--------------+-------------+
| Repairs and maintenance | | | 842 | 2 363 |
+-----------------------------------------------------------------------+----------+--+--------------+-------------+
| | | | 43 856 | 14 275 |
+-----------------------------------------------------------------------+----------+--+--------------+-------------+
| | | | | |
+-----------------------------------------------------------------------+----------+--+--------------+-------------+
6. Other income
+-----------------------------------------------------+-------+---+-----------+-----------+
| In thousands of US dollars | | | | |
+-----------------------------------------------------+-------+---+-----------+-----------+
| | | | 2009 | 2008 |
+-----------------------------------------------------+-------+---+-----------+-----------+
| | | | Unaudited | Unaudited |
+-----------------------------------------------------+-------+---+-----------+-----------+
| | | | | |
+-----------------------------------------------------+-------+---+-----------+-----------+
| Profit/(Loss) on disposal of fixed assets | | | (264) | 47 |
+-----------------------------------------------------+-------+---+-----------+-----------+
| Rental Income | | | 59 | 1 |
+-----------------------------------------------------+-------+---+-----------+-----------+
| Other | | | 62 | - |
+-----------------------------------------------------+-------+---+-----------+-----------+
| | | | | |
+-----------------------------------------------------+-------+---+-----------+-----------+
| | | | | |
+-----------------------------------------------------+-------+---+-----------+-----------+
| | | | (143) | 48 |
+-----------------------------------------------------+-------+---+-----------+-----------+
7. Other operating expenses
+-----------------------------------------------------+-------+---+-----------+-----------+
| In thousands of US dollars | | | | |
+-----------------------------------------------------+-------+---+-----------+-----------+
| | | | 2009 | 2008 |
+-----------------------------------------------------+-------+---+-----------+-----------+
| | | | Unaudited | Unaudited |
+-----------------------------------------------------+-------+---+-----------+-----------+
| | | | | |
+-----------------------------------------------------+-------+---+-----------+-----------+
| Administration and office expenses | | | 442 | 273 |
+-----------------------------------------------------+-------+---+-----------+-----------+
| Auditors remuneration | | | | |
+-----------------------------------------------------+-------+---+-----------+-----------+
| - Audit fee | | | 149 | 3 |
+-----------------------------------------------------+-------+---+-----------+-----------+
| - Fees for other services | | | - | - |
+-----------------------------------------------------+-------+---+-----------+-----------+
| Consulting fees | | | 394 | 385 |
+-----------------------------------------------------+-------+---+-----------+-----------+
| Depreciation | | | 751 | 142 |
+-----------------------------------------------------+-------+---+-----------+-----------+
| Legal fees | | | 347 | - |
+-----------------------------------------------------+-------+---+-----------+-----------+
| Personnel expenses | | | 3 734 | 3 306 |
+-----------------------------------------------------+-------+---+-----------+-----------+
| Provision for bad debts | | | 209 | - |
+-----------------------------------------------------+-------+---+-----------+-----------+
| Loss on foreign exchange | | | 1 205 | 9 |
+-----------------------------------------------------+-------+---+-----------+-----------+
| Rehabilitation costs | | | 54 | 661 |
+-----------------------------------------------------+-------+---+-----------+-----------+
| Travel | | | 630 | 433 |
+-----------------------------------------------------+-------+---+-----------+-----------+
| Other | | | 546 | 560 |
+-----------------------------------------------------+-------+---+-----------+-----------+
| | | | 8 461 | 5 772 |
+-----------------------------------------------------+-------+---+-----------+-----------+
8. Personnel expenses
+-----------------------------------------------------+-------+---+-----------+-----------+
| In thousands of US dollars | | | | |
+-----------------------------------------------------+-------+---+-----------+-----------+
| | | | 2009 | 2008 |
+-----------------------------------------------------+-------+---+-----------+-----------+
| | | | Unaudited | Unaudited |
+-----------------------------------------------------+-------+---+-----------+-----------+
| | | | | |
+-----------------------------------------------------+-------+---+-----------+-----------+
| Wages and salaries | | | 4 349 | 5 410 |
+-----------------------------------------------------+-------+---+-----------+-----------+
| Retrenchment costs | | | 410 | - |
+-----------------------------------------------------+-------+---+-----------+-----------+
| Staff welfare | | | 7 | 18 |
+-----------------------------------------------------+-------+---+-----------+-----------+
| Equity-settled transactions | | | 617 | 1 835 |
+-----------------------------------------------------+-------+---+-----------+-----------+
| | | | 5 383 | 7 263 |
+-----------------------------------------------------+-------+---+-----------+-----------+
| | | | | |
+-----------------------------------------------------+-------+---+-----------+-----------+
| The above is classified as follows: | | | | |
+-----------------------------------------------------+-------+---+-----------+-----------+
| Cost of sales - relating to operations | | | 1 649 | 2 121 |
+-----------------------------------------------------+-------+---+-----------+-----------+
| Other operating expenses | | | 3 734 | 3 307 |
+-----------------------------------------------------+-------+---+-----------+-----------+
| | | | 5 383 | 5 428 |
+-----------------------------------------------------+-------+---+-----------+-----------+
| | | | | |
+-----------------------------------------------------+-------+---+-----------+-----------+
9. Finance income and expenses
+------------------------------------------------------------+---+-----------+-----------+
| In thousands of US dollars | | | |
+------------------------------------------------------------+---+-----------+-----------+
| | | 2009 | 2008 |
+------------------------------------------------------------+---+-----------+-----------+
| | | Unaudited | Unaudited |
+------------------------------------------------------------+---+-----------+-----------+
| | | | |
+------------------------------------------------------------+---+-----------+-----------+
| Interest income | | 341 | 1 348 |
+------------------------------------------------------------+---+-----------+-----------+
| | | | |
+------------------------------------------------------------+---+-----------+-----------+
| Interest expense - Preference shares | | - | (1 098) |
+------------------------------------------------------------+---+-----------+-----------+
| Interest expense - Unsecured loan | | (130) | (907) |
+------------------------------------------------------------+---+-----------+-----------+
| Finance expense on late payment | | - | (537) |
+------------------------------------------------------------+---+-----------+-----------+
| Interest expense - Other | | (10) | (21) |
+------------------------------------------------------------+---+-----------+-----------+
| | | (140) | (2 563) |
+------------------------------------------------------------+---+-----------+-----------+
| | | | |
+------------------------------------------------------------+---+-----------+-----------+
| Net financing income/(costs) | | 201 | (1 215) |
+------------------------------------------------------------+---+-----------+-----------+
10. Deferred Tax
+------------------------------------------------------------+---+-----------+-----------+
| In thousands of US dollars | | | |
+------------------------------------------------------------+---+-----------+-----------+
| | | 2009 | 2008 |
+------------------------------------------------------------+---+-----------+-----------+
| | | Unaudited | Unaudited |
+------------------------------------------------------------+---+-----------+-----------+
| | | | |
+------------------------------------------------------------+---+-----------+-----------+
| Opening balance | | 3 547 | 4 362 |
+------------------------------------------------------------+---+-----------+-----------+
| | | | |
+------------------------------------------------------------+---+-----------+-----------+
| Recognised through Income Statement | | (2 390) | (1 027) |
+------------------------------------------------------------+---+-----------+-----------+
| | | | |
+------------------------------------------------------------+---+-----------+-----------+
| Depreciation | | (145) | (633) |
+------------------------------------------------------------+---+-----------+-----------+
| Inventory | | (6) | (34) |
+------------------------------------------------------------+---+-----------+-----------+
| Impairment | | (2 239) | - |
+------------------------------------------------------------+---+-----------+-----------+
| Provisions | | - | (46) |
+------------------------------------------------------------+---+-----------+-----------+
| Tax losses | | | (314) |
+------------------------------------------------------------+---+-----------+-----------+
| | | | |
+------------------------------------------------------------+---+-----------+-----------+
| Business Combinations | | - | 591 |
+------------------------------------------------------------+---+-----------+-----------+
| | | | |
+------------------------------------------------------------+---+-----------+-----------+
| Foreign Currency Translation Reserve | | (691) | (379) |
+------------------------------------------------------------+---+-----------+-----------+
| | | | |
+------------------------------------------------------------+---+-----------+-----------+
| Closing Balance | | 466 | 3 547 |
+------------------------------------------------------------+---+-----------+-----------+
| | | | |
+------------------------------------------------------------+---+-----------+-----------+
11. Property, plant and equipment
+------------------------------------------+------+-------+-----------+------------+----------+----------+
| In thousands of US dollars | | Land | Plant | Mineral | Capital | Total |
| | | | and | properties | work in | |
| | | | equipment | | progress | |
+------------------------------------------+------+-------+-----------+------------+----------+----------+
| | | | | | | |
+------------------------------------------+------+-------+-----------+------------+----------+----------+
| Cost | | | | | | |
+------------------------------------------+------+-------+-----------+------------+----------+----------+
| Six months ended 28 February 2009 (Unaudited): | | | | | |
+-------------------------------------------------+-------+-----------+------------+----------+----------+
| Balance at 01 September 2008 | |1 119 | 39 731 | 26 244 | 5 806 | 72 900 |
+------------------------------------------+------+-------+-----------+------------+----------+----------+
| Additions | | - | 6 762 | - | 723 | 7 485 |
+------------------------------------------+------+-------+-----------+------------+----------+----------+
| Disposals | | - | (3 678) | - | - | (3 678) |
+------------------------------------------+------+-------+-----------+------------+----------+----------+
| Effect of translation of foreign | |(223) | (7 448) | (6 421) | (949) |(15 041) |
| currencies | | | | | | |
+------------------------------------------+------+-------+-----------+------------+----------+----------+
| Balance at 28 February 2009 | | 896 | 35 367 | 19 823 | 5 580 | 61 666 |
+------------------------------------------+------+-------+-----------+------------+----------+----------+
| | | | | | | |
+------------------------------------------+------+-------+-----------+------------+----------+----------+
| Year ended 31 August 2008: | | | | | | |
+------------------------------------------+------+-------+-----------+------------+----------+----------+
| Balance at 01 September 2007 | | 439 | 16 649 | 20 712 | 40 | 37 840 |
+------------------------------------------+------+-------+-----------+------------+----------+----------+
| Acquisitions through business | | - | 1 486 | 1 563 | - | 3 049 |
| combinations | | | | | | |
+------------------------------------------+------+-------+-----------+------------+----------+----------+
| Other additions | | 713 | 23 144 | 5 629 | 5 769 | 35 255 |
+------------------------------------------+------+-------+-----------+------------+----------+----------+
| Disposals | | - | (196) | - | - | (196) |
+------------------------------------------+------+-------+-----------+------------+----------+----------+
| Effect of translation of foreign | | (33) | (1 352) | (1 660) | (3) | (3 048) |
| currencies | | | | | | |
+------------------------------------------+------+-------+-----------+------------+----------+----------+
| Balance at 31 August 2008 | |1 119 | 39 731 | 26 244 | 5 806 | 72 900 |
+------------------------------------------+------+-------+-----------+------------+----------+----------+
| | | | | | | |
+------------------------------------------+------+-------+-----------+------------+----------+----------+
| Depreciation and impairment losses | | | | | |
+------------------------------------------+------+-------+-----------+------------+----------+
| Six months ended 28 February 2009 (Unaudited): | | | | |
+-------------------------------------------------+-------+-----------+------------+----------+
| Balance at 01 September 2008 | | - | 4 988 | 960 | - | 5 948 |
+------------------------------------------+------+-------+-----------+------------+----------+----------+
| Depreciation charge for the period | | - | 1 460 | 373 | - | 1 833 |
+------------------------------------------+------+-------+-----------+------------+----------+----------+
| Disposals | | - | (735) | - | - | (735) |
+------------------------------------------+------+-------+-----------+------------+----------+----------+
| Impairment | | - | 387 | 19 986 | - | 20 373 |
+------------------------------------------+------+-------+-----------+------------+----------+----------+
| Effect of translation of foreign | | | (2 712) | (1 496) | - | (4 208) |
| currencies | | | | | | |
+------------------------------------------+------+-------+-----------+------------+----------+----------+
| Balance at 28 February 2009 | | - | 3 388 | 19 823 | - | 23 211 |
+------------------------------------------+------+-------+-----------+------------+----------+----------+
| Year ended 31 August 2008 (Unaudited): | | | | | | |
+------------------------------------------+------+-------+-----------+------------+----------+----------+
| Balance at 01 September 2007 | | - | 2 115 | 213 | - | 2 328 |
+------------------------------------------+------+-------+-----------+------------+----------+----------+
| Depreciation charge for the year | | - | 3 173 | 763 | - | 3 936 |
+------------------------------------------+------+-------+-----------+------------+----------+----------+
| Disposals | | - | (139) | - | - | (139) |
+------------------------------------------+------+-------+-----------+------------+----------+----------+
| Effect of translation of foreign | | | (161) | (16) | - | (177) |
| currencies | | | | | | |
+------------------------------------------+------+-------+-----------+------------+----------+----------+
| Balance at 31 August 2008 | | - | 4 988 | 960 | - | 5 948 |
+------------------------------------------+------+-------+-----------+------------+----------+----------+
| | | | | | | |
+------------------------------------------+------+-------+-----------+------------+----------+----------+
| Net book value | | | | | | |
+------------------------------------------+------+-------+-----------+------------+----------+----------+
| At 28 February 2009 (Unaudited) | | 896 | 31 979 | - | 5 580 | 38 455 |
+------------------------------------------+------+-------+-----------+------------+----------+----------+
| At 31 August 2008 (Audited) | |1 119 | 34 743 | 25 284 | 5 806 | 66 952 |
+------------------------------------------+------+-------+-----------+------------+----------+----------+
| | | | | | | |
+------------------------------------------+------+-------+-----------+------------+----------+----------+
12. Inventories
+-----------------------------------------------------+-------+------+-----------+---------+
| In thousands of US dollars | | | | |
+-----------------------------------------------------+-------+------+-----------+---------+
| | | | 2009 | 2008 |
+-----------------------------------------------------+-------+------+-----------+---------+
| | | | Unaudited | Audited |
+-----------------------------------------------------+-------+------+-----------+---------+
| | | | | |
+-----------------------------------------------------+-------+------+-----------+---------+
| Rough diamonds | | | 13 611 | 44 762 |
+-----------------------------------------------------+-------+------+-----------+---------+
| Polished diamonds | | | 8 231 | 3 867 |
+-----------------------------------------------------+-------+------+-----------+---------+
| Jewellery | | | 45 | 90 |
+-----------------------------------------------------+-------+------+-----------+---------+
| Consumables | | | 898 | 491 |
+-----------------------------------------------------+-------+------+-----------+---------+
| | | | 22 785 | 49 210 |
+-----------------------------------------------------+-------+------+-----------+---------+
Inventories are measured at the lower of cost and net realisable value on the
first-in-first-out
basis.
Net realisable value is the estimated selling price in the ordinary course
of business less the estimated costs of completion and the estimated costs
necessary to make the sale. The cost of inventories comprises of all costs of
purchase, costs of conversion and other costs incurred in bringing the
inventories to their present location and condition.
When inventories are sold, the carrying amounts of those inventories are
recognised as an
expense in the period in which the related revenue is
recognised. The amount of any writedown
of inventories to net realisable
value and all losses of inventories are recognised as an expense in the period
the write-down or loss occurs. The amount of any reversal of any write-down of
inventories, arising from an increase in net realisable value, are recognised as
a reduction in the amount of inventories recognised as an expense in the period
in which the reversal occurs.
Included in rough diamonds are inventories to the value of US$ 12 677 790
(2008:2 376 650) carried at net realisable value. Included in polished diamonds
are inventories to the value of US$6 868 176 (2008:615 323) carried at net
realisable value.
Inventory write-downs:
+-----------------------------------------------------+-------+------+-----------+---------+
| In thousands of US dollars | | | | |
+-----------------------------------------------------+-------+------+-----------+---------+
| | | | 2009 | 2008 |
+-----------------------------------------------------+-------+------+-----------+---------+
| | | |Unaudited |Audited |
+-----------------------------------------------------+-------+------+-----------+---------+
| | | | | |
+-----------------------------------------------------+-------+------+-----------+---------+
| Rough diamonds | | | 25 792 | |
+-----------------------------------------------------+-------+------+-----------+---------+
| Polished diamonds | | | 6 324 | 3 397 |
+-----------------------------------------------------+-------+------+-----------+---------+
| | | | 32 116 | 3 397 |
+-----------------------------------------------------+-------+------+-----------+---------+
13. Capital and reserves
Share capital and share premium
Movements in the Group's share capital is reflected below:
Ordinary Shares
+--------------------------------------------------------------+---+-----------+-----------+
| In thousands of shares | | 28 |31 August |
| | | February | 2008 |
| | | 2009 | |
+--------------------------------------------------------------+---+-----------+-----------+
| | | Unaudited | Unaudited |
+--------------------------------------------------------------+---+-----------+-----------+
| | | | |
+--------------------------------------------------------------+---+-----------+-----------+
| On issue at beginning of the year | | 116 866 | 2 357 |
+--------------------------------------------------------------+---+-----------+-----------+
| Issued for cash | | - | 46 |
+--------------------------------------------------------------+---+-----------+-----------+
| Share based payments | | - | 100 |
+--------------------------------------------------------------+---+-----------+-----------+
| Repurchase of "A" shares | | 2 112 | 69 |
+--------------------------------------------------------------+---+-----------+-----------+
| | | | 2 572 |
+--------------------------------------------------------------+---+-----------+-----------+
| Share split 16:1 | | - | 38 582 |
+--------------------------------------------------------------+---+-----------+-----------+
| Reduction in pre-listing shares* | | - | (1 688) |
+--------------------------------------------------------------+---+-----------+-----------+
| Conversion of preference shares on listing** | | - | 25 825 |
+--------------------------------------------------------------+---+-----------+-----------+
| Issued as script dividend to preference shareholders | | - | 673 |
+--------------------------------------------------------------+---+-----------+-----------+
| Shares issued to non-executive directors | | - | 341 |
+--------------------------------------------------------------+---+-----------+-----------+
| Issued on IPO | | - | 50 118 |
+--------------------------------------------------------------+---+-----------+-----------+
| Exercise of share grant | | - | 443 |
+--------------------------------------------------------------+---+-----------+-----------+
| On issue at the end of the year - fully paid | | 118 978 | 116 866 |
+--------------------------------------------------------------+---+-----------+-----------+
At 28 February 2009 the authorised share capital comprised 251 000 000 (31
August 2008: 251 000 000) ordinary shares. All classes of shares have a par
value of $ 0.000625 (31 August 2008 $ 0.000625) per share. All issued shares are
fully paid. The Group also granted share options.
*- The number of ordinary shares was diluted at listing to affect the redemption
of the convertible loan notes valued at $6,238m.
**- The redeemable preference shares were completely redeemed and converted into
ordinary shares.
+-----------------------------------------------------+-------+-+--+------------+------------+
| Ordinary share capital and share premium | | | | 28 | 31 August |
| | | | | February | 2008 |
| | | | | 2009 | |
+-----------------------------------------------------+-------+-+--+------------+------------+
| In thousands of US dollars | | | | Unaudited | Audited |
+-----------------------------------------------------+-------+-+--+------------+------------+
| | | | | | |
+-----------------------------------------------------+-------+-+--+------------+------------+
| | | | | | |
+-----------------------------------------------------+-------+-+--+------------+------------+
| Nominal value | | | | 74 | 74 |
+-----------------------------------------------------+-------+-+--+------------+------------+
| Share premium | | | | 229 727 | 227 131 |
+-----------------------------------------------------+-------+-+--+------------+------------+
| | | | | 229 801 | 227 205 |
+-----------------------------------------------------+-------+-+--+------------+------------+
Ordinary share capital and share premium
+----------------------------------------------------+-------+-+--+------------+------------+
| In thousands of US dollars | | | | | |
+----------------------------------------------------+-------+-+--+------------+------------+
| | | | | | |
+----------------------------------------------------+-------+-+--+------------+------------+
| On issue at the beginning of the period | | | | 227 205 | 11 227 |
+----------------------------------------------------+-------+-+--+------------+------------+
| Issued for cash | | | | - | 170 754 |
+----------------------------------------------------+-------+-+--+------------+------------+
| Conversion of preference shares on listing | | | | - | 42 868 |
+----------------------------------------------------+-------+-+--+------------+------------+
| Issued for the repurchase of "A" shares | | | | 2 596 | 916 |
+----------------------------------------------------+-------+-+--+------------+------------+
| Exercise of awards | | | | - | 1 440 |
+----------------------------------------------------+-------+-+--+------------+------------+
| | | | | 229 801 | 227 205 |
+----------------------------------------------------+-------+-+--+------------+------------+
14. Capital and reserves (continued)
Share capital and share premium (continued)
The holders of ordinary shares are entitled to receive dividends as declared
from time to time and are entitled to one vote per share at meetings of the
Company.
Reserves
+---------------------------------------------------------------+------------+------------+
| In thousands of US dollars | | |
+---------------------------------------------------------------+------------+------------+
| | 31 August | 31 August |
| | 2009 | 2008 |
+---------------------------------------------------------------+------------+------------+
| | | |
+---------------------------------------------------------------+------------+------------+
| Foreign currency translation reserve | (16 361) | ( 4 165) |
+---------------------------------------------------------------+------------+------------+
| Share based payment reserve | 2 817 | 2 198 |
+---------------------------------------------------------------+------------+------------+
| | (13 544) | (1 967) |
+---------------------------------------------------------------+------------+------------+
15. Minority interests
A Subsidiary of the Company has also issued 'A' shares.
The holders of these shares are entitled to receive dividends as declared from
time to time and are treated as minority shareholders in the group
+------+----------+---------+
| | 28 | 31 |
| |February | August |
| | 2009 | 2008 |
+------+----------+---------+
A Shares
+-----------------------------------------------------------+----+----+-----------+----------+
| In thousands of US dollars | | | Unaudited | Audited |
+-----------------------------------------------------------+----+----+-----------+----------+
| | | | | |
+-----------------------------------------------------------+----+----+-----------+----------+
| | | | | |
+-----------------------------------------------------------+----+----+-----------+----------+
| Nominal value | | | 4 | 5 |
+-----------------------------------------------------------+----+----+-----------+----------+
| Share premium | | | 2 807 | 5 604 |
+-----------------------------------------------------------+----+----+-----------+----------+
| | | | 2 811 | 5 609 |
+-----------------------------------------------------------+----+----+-----------+----------+
A Shares
+----------------------------------------------------------+----+----+----------+----------+
| | | | | |
+----------------------------------------------------------+----+----+----------+----------+
| In thousands of shares | | | | |
+----------------------------------------------------------+----+----+----------+----------+
| | | | | |
+----------------------------------------------------------+----+----+----------+----------+
| On issue at the beginning of the period | | | 8 750 | 635 |
+----------------------------------------------------------+----+----+----------+----------+
| Share buy back | | | - | (69) |
+----------------------------------------------------------+----+----+----------+----------+
| | | | 8 750 | 566 |
+----------------------------------------------------------+----+----+----------+----------+
| Share split 16:1 | | | - | 8 490 |
+----------------------------------------------------------+----+----+----------+----------+
| Share Buy Back | | | (1 983) | (306) |
+----------------------------------------------------------+----+----+----------+----------+
| Issued for property, plant and equipment | | | 99 | - |
+----------------------------------------------------------+----+----+----------+----------+
| On issue at the end of the period - fully paid | | | 6 866 | 8 750 |
+----------------------------------------------------------+----+----+----------+----------+
A Shares
+----------------------------------------------------------+----+----+----------+---+-------+
| In thousands of US dollars | | | | |
+----------------------------------------------------------+----+----+----------+-----------+
| | | | | |
+----------------------------------------------------------+----+----+----------+-----------+
| On issue at the beginning of the period | | | 5 609 | 7 042 |
+----------------------------------------------------------+----+----+----------+-----------+
| Issued for property, plant and equipment | | | 290 | - |
+----------------------------------------------------------+----+----+----------+-----------+
| Share buy back | | | (3 088) | (1,433) |
+----------------------------------------------------------+----+----+----------+-----------+
| On issue at the end of the period- fully paid | | | 2 811 | 5 609 |
+----------------------------------------------------------+----+----+----------+---+-------+
In the 2007 financial year, a second class of shares, 'A' shares, were issued in
Namakwa Diamond Holdings (Pty) Ltd, a 100% subsidiary of the Company. These 'A'
shares were issued to certain South African residents investing in the Group and
to fund acquisitions in the prior period. These 'A' shares rank pari passu with
the rights attaching to the Namakwa Diamonds Limited ordinary shares and give
the holder an effective economic interest in the profits of the Company as set
out below. As set out in the accounting policies, the 'A' shares have been
treated as a minority investment in the Group accounts.
Rights attaching to 'A' shares
Each 'A' share will be issued on the basis that:
* the rights attaching to the shares shall rank pari passu with the rights
attaching to the Namakwa Diamonds Limited Ordinary Shares, and any alteration of
the ordinary share capital of Namakwa Diamonds Limited shall apply mutatis
mutandis to the 'A' Ordinary Shares;
* if the Namakwa Diamonds Limited Ordinary Shares are consolidated or sub-divided,
the same will apply, mutatis mutandis, to the 'A' Ordinary Shares; and
* if any rights issue is implemented by Namakwa Diamonds Limited, Namakwa Diamond
Holdings (Pty) Ltd will automatically have a rights issue in respect of the 'A'
Ordinary Shares on identical terms to the rights issue implemented by Namakwa
Diamonds Limited, which will include, but not be limited to the price per
Namakwa Diamonds Limited rights issue share and the ratio of Namakwa Diamonds
Limited right issue shares to existing Namakwa Diamonds Limited Ordinary Shares;
and
* if the shareholder of Namakwa Diamonds Limited receive Namakwa Diamonds Limited
Ordinary Shares in substitution for all their Namakwa Diamonds Limited Ordinary
Shares then the number of 'A' Ordinary Shares will be automatically adjusted
that each 'A' Shareholder will own the number of 'A' Ordinary Shares as equals
their existing number of 'A' Ordinary Shares, multiplied by the common number of
substitution Namakwa Diamonds Limited Ordinary Shares issued for each Namakwa
Diamonds Limited Ordinary Share.
Dividends
The 'A' Shareholders shall only be entitled to an 'A' Ordinary Dividend (which
for the avoidance of doubt shall mean that as and when Namakwa Diamonds Limited
declares a dividend in respect of the Namakwa Diamonds Limited Ordinary Shares,
then the 'A' Ordinary Shares will be entitled to an 'A'
Ordinary Dividend out of the profits of Namakwa Diamond Holdings (Pty) Ltd
available for distribution per "A" Ordinary Share equal to "D" calculated in
accordance with the following formula:
D = A x F
Where:
A = the dividend declared and payable by Namakwa Diamonds Limited in
respect of each Namakwa Diamonds Limited Ordinary Share; and
F = the spot foreign exchange rate quoted by Nedbank Limited on the date
on which the relevant Namakwa ordinary dividend is payable to the Namakwa
shareholders to determine the South African Rand value in respect of the 'A'
Ordinary Dividends;
The Company in general meeting or the directors of the Company shall be entitled
to declare an 'A' Ordinary Dividend in respect of the 'A' Ordinary Shares on the
basis that the 'A' Ordinary Dividend shall be payable on the date upon which the
relevant dividend is payable to the shareholders of Namakwa Diamonds Limited in
respect of Namakwa Diamonds Limited Ordinary Shares, to the 'A' Shareholders
registered as such on the declaration date of the relevant dividend pertaining
to the Namakwa Diamonds Limited Ordinary Shares.
Payment in respect of 'A' Ordinary Dividends and any other payments will be made
in South African Rands at the risk of the relevant 'A' Shareholder.
Repurchase
Each 'A' Shareholder shall, subject to the provisions of Section 85 of the
Companies Act (South Africa) and the specific authority granted to the Company
in terms of special resolution no. 4, be entitled to require the Company to
repurchase some or all of the 'A' Ordinary Shares at any time by delivery of a
Repurchase Notice to the Company specifying the number of 'A' Ordinary Shares
being the subject of such repurchase.
The Company shall be obliged to repurchase the 'A' Ordinary Shares that are
required to be repurchased in terms of the Repurchase Notice within 90 days of
receipt of such Repurchase Notice, subject to:
* the Company possessing sufficient funds for such purpose; and
* the absolute and sole discretion of the board of directors of the Company who
shall at all times be obliged to consider the financial position of the Company,
but who in exercising their discretion, shall not withhold the consent to such
repurchase unreasonably.
The repurchase price is determined by calculating the aggregate of the par
value of the "A" Shares plus any unpaid dividend plus the weighted average
traded price of Namakwa Diamonds Limited ordinary shares for the 30 day period
prior to repurchase.?
16. Earnings per share
Basic earnings per share
The calculation of basic loss per share for the year was based on the loss
attributable to ordinary shareholders of US$72 492 706 (2008: US$ 34 229 532)
and a weighted average number of ordinary shares outstanding of 118 397 177 (92
889 756), based on the dates on which shares were issued during the year.
Profit attributable to ordinary shareholders
+------------------------------------------------------+-------+-------+---------+--------+
| In thousands of US dollars | | | | |
+------------------------------------------------------+-------+-------+---------+--------+
| | | | 2009 | 2008 |
+------------------------------------------------------+-------+-------+---------+--------+
| Loss attributable to ordinary shareholders | | | 72 493 | 34 230 |
+------------------------------------------------------+-------+-------+---------+--------+
| Loss attributable to minority shareholders | | | 4 181 | 4 772 |
+------------------------------------------------------+-------+-------+---------+--------+
Weighted average number of ordinary shares
+------------------------------------------------------+------+--------+---------+--------+
| In thousands of shares | | | | |
+------------------------------------------------------+------+--------+---------+--------+
| | | | 2009 | 2008 |
+------------------------------------------------------+------+--------+---------+--------+
| Weighted average number of ordinary shares | | | 118 397 | 92 890 |
+------------------------------------------------------+------+--------+---------+--------+
Earnings per share
+------------------------------------------------------+-------+-------+---------+--------+
| In thousands of US dollars | | | | |
+------------------------------------------------------+-------+-------+---------+--------+
| | | | 2009 | 2008 |
+------------------------------------------------------+-------+-------+---------+--------+
| Basic earnings per share | | | (0.61) | (0.37) |
+------------------------------------------------------+-------+-------+---------+--------+
| Diluted earnings per share | | | (0.61) | (0.37) |
+------------------------------------------------------+-------+-------+---------+--------+
Diluted loss per share
The calculation of diluted loss per share at 28 February 2009 was based on loss
attributable to ordinary shareholders of US$72 492 706 (2008: US$34 229 532) , a
weighted average number of ordinary shares outstanding after adjustment for the
effects of all dilutive potential ordinary shares of 118 397 177(2008: 92 889
756). There were no adjustments to the amounts used for basic earnings per
share, as the Company is in a net loss position and the following dilutive
transaction became anti-dilutive: The share options outstanding.
17. Interest-bearing loans and borrowings
This note provides information about the contractual terms of the Group's
interest-bearing loans and borrowings.
+------------------------------------------------------+-------+--+-----------+-----------+
| In thousands of US dollars | | | | |
+------------------------------------------------------+-------+--+-----------+-----------+
| | | | 2009 | 2008 |
+------------------------------------------------------+-------+--+-----------+-----------+
| | | | Unaudited | Unaudited |
+------------------------------------------------------+-------+--+-----------+-----------+
| Non-current liabilities | | | | |
+------------------------------------------------------+-------+--+-----------+-----------+
| Secured loan | | | 62 | 84 |
+------------------------------------------------------+-------+--+-----------+-----------+
| Finance lease liabilities | | | 938 | 1 514 |
+------------------------------------------------------+-------+--+-----------+-----------+
| | | | 1 000 | 1 598 |
+------------------------------------------------------+-------+--+-----------+-----------+
| | | | | |
+------------------------------------------------------+-------+--+-----------+-----------+
| Current liabilities | | | | |
+------------------------------------------------------+-------+--+-----------+-----------+
| Secured loan | | | 7 | 13 |
+------------------------------------------------------+-------+--+-----------+-----------+
| Finance lease liabilities | | | 482 | 573 |
+------------------------------------------------------+-------+--+-----------+-----------+
| | | | 489 | 586 |
+------------------------------------------------------+-------+--+-----------+-----------+
| | | | | |
+------------------------------------------------------+-------+--+-----------+-----------+
| Disclosed in the balance sheet as: | | | | |
+------------------------------------------------------+-------+--+-----------+-----------+
| Non - Current | | | | |
+------------------------------------------------------+-------+--+-----------+-----------+
| Interest bearing loans and borrowings | | | 1 000 | 1 598 |
+------------------------------------------------------+-------+--+-----------+-----------+
| | | | | |
+------------------------------------------------------+-------+--+-----------+-----------+
| Current | | | | |
+------------------------------------------------------+-------+--+-----------+-----------+
| Current portion of interest bearing loans and | | | 489 | 586 |
| borrowings | | | | |
+------------------------------------------------------+-------+--+-----------+-----------+
| | | | | |
+------------------------------------------------------+-------+--+-----------+-----------+
Terms and debt repayment schedule
+---------------------------+----------------------------+-----------+---------------+-----------+-----------+-----------+
| | | | 31 Aug 2009 | | | |
+---------------------------+----------------------------+-----------+---------------+-----------+-----------+-----------+
| | Denominated | Nominal | Year of | Fair | Carrying | |
+---------------------------+----------------------------+-----------+---------------+-----------+-----------+-----------+
| | In thousands of US dollars | Currency | interest rate | maturity | value | amount |
+---------------------------+----------------------------+-----------+---------------+-----------+-----------+-----------+
| | | | | | | |
+---------------------------+----------------------------+-----------+---------------+-----------+-----------+-----------+
| Floating rate borrowings: | | | | | | |
+---------------------------+----------------------------+-----------+---------------+-----------+-----------+-----------+
| | Secured loan | ZAR | Prime* | 2016 | 69 | 69 |
+---------------------------+----------------------------+-----------+---------------+-----------+-----------+-----------+
| | Finance lease liabilities | ZAR | 9-17% | 2009-2013 | 1420 | 1420 |
+---------------------------+----------------------------+-----------+---------------+-----------+-----------+-----------+
| | | | | | | |
+---------------------------+----------------------------+-----------+---------------+-----------+-----------+-----------+
* In South Africa the Prime interest rate represents the index on which banks
lend to their customers and is derived from the interbank rate.
+-----------+----------------------------+-----------+---------------+-------------+-----------+-----------+
| | | | | | | |
+-----------+----------------------------+-----------+---------------+-------------+-----------+-----------+
| | | | | 31 Aug 2008 | | |
+-----------+----------------------------+-----------+---------------+-------------+-----------+-----------+
| | Denominated | Nominal | Year of | Face | Carrying | |
+-----------+----------------------------+-----------+---------------+-------------+-----------+-----------+
| | In thousands of US dollars | Currency | interest rate | maturity | value | amount |
+-----------+----------------------------+-----------+---------------+-------------+-----------+-----------+
| | | | | | | |
+-----------+----------------------------+-----------+---------------+-------------+-----------+-----------+
| Floating rate | | | | | |
| borrowings: | | | | | |
+----------------------------------------+-----------+---------------+-------------+-----------+-----------+
| | Secured loan | ZAR | Prime* | 2016 | 97 | 97 |
+-----------+----------------------------+-----------+---------------+-------------+-----------+-----------+
| | Finance lease liabilities | ZAR | 9-17% | 2008-2013 | 2 087 | 2 087 |
+-----------+----------------------------+-----------+---------------+-------------+-----------+-----------+
*In South Africa the Prime interest rate represents the index on which banks
lend to their customers and is derived from the interbank rate.
Secured loan
The loan is secured over certain properties as discussed in Note 17.
Finance lease liabilities
Finance lease liabilities are payable as follows:
For the six months ended 28 February 2009 (Unaudited):
+--------------------------------------+--------+--------+-----------+----------+-----------+
| | | | Minimum | | Interest |
| | | | lease | Capital | |
| | | | payments | | |
+--------------------------------------+--------+--------+-----------+----------+-----------+
| In thousands of US dollars | | | 2009 | 2008 | 2008 |
+--------------------------------------+--------+--------+-----------+----------+-----------+
| | | | | | |
+--------------------------------------+--------+--------+-----------+----------+-----------+
| Less than one year | | | 653 | 482 | 171 |
+--------------------------------------+--------+--------+-----------+----------+-----------+
| Between one and five years | | | 1 076 | 938 | 138 |
+--------------------------------------+--------+--------+-----------+----------+-----------+
| | | | 1 729 | 1 420 | 309 |
+--------------------------------------+--------+--------+-----------+----------+-----------+
For the year ended 31 August 2008 (Unaudited):
+--------------------------------------+--------+--------+-----------+----------+-----------+
| | | | Minimum | | Interest |
| | | | lease | Capital | |
| | | | payments | | |
+--------------------------------------+--------+--------+-----------+----------+-----------+
| In thousands of US dollars | | | 2008 | 2008 | 2008 |
+--------------------------------------+--------+--------+-----------+----------+-----------+
| | | | | | |
+--------------------------------------+--------+--------+-----------+----------+-----------+
| Less than one year | | | 885 | 573 | 312 |
+--------------------------------------+--------+--------+-----------+----------+-----------+
| Between one and five years | | | 1 686 | 1 514 | 172 |
+--------------------------------------+--------+--------+-----------+----------+-----------+
| | | | 2 571 | 2 087 | 484 |
+--------------------------------------+--------+--------+-----------+----------+-----------+
18. Capital commitments
During the six months ended 28 February 2009 the Group entered into a contract
to purchase property, plant and equipment for $300 155 (Year ended 31 August
2008 $2 702 514). These commitments are expected to be settled in the current
financial year.
19. Related parties
Identity of related parties
The Group has a related party relationship with its subsidiaries, joint
ventures, directors and executive officers.
Transactions with key management personnel
Directors of the Company and their immediate relatives control 18.78 per cent
(FY2008:19.15 per cent) of the voting shares of the Company.
During the six months remuneration was paid to key management personnel for
executive services rendered to the amount of US$1 509,850 (2008: US$425,125) In
addition to these payments, share based payments were granted in 2008.
No loans were made to directors during the current financial year.
Group entities
Significant subsidiaries
As at the year end the following were subsidiaries:
+----------------------------------------------------+------------------------------------+---------------------------+
| | Country of | Ownership |
+----------------------------------------------------+------------------------------------+---------------------------+
| | incorporation | interest |
+----------------------------------------------------+------------------------------------+---------------------------+
| | | 2009 |
+----------------------------------------------------+------------------------------------+---------------------------+
| Amira SA | Panama | 100 |
+----------------------------------------------------+------------------------------------+---------------------------+
| Debon Logistics Limited SA | Panama | 100 |
+----------------------------------------------------+------------------------------------+---------------------------+
| Namakwa Diamonds DRC | Panama | 100 |
+----------------------------------------------------+------------------------------------+---------------------------+
| Namakwa Diamonds Namibia SA | Panama | 100 |
+----------------------------------------------------+------------------------------------+---------------------------+
| Namakwa Diamonds Management Services (Pty) Limited | South Africa (RSA) | 100 |
+----------------------------------------------------+------------------------------------+---------------------------+
| Namdima Enterprises SA | Panama | 100 |
+----------------------------------------------------+------------------------------------+---------------------------+
| Adima SPRL | Democratic Republic of Congo (DRC) | 100* |
+----------------------------------------------------+------------------------------------+---------------------------+
| Dorod SPRL | DRC | 100* |
+----------------------------------------------------+------------------------------------+---------------------------+
| Namakwa Diamonds Mining Company DRC SPRL | DRC | 100* |
+----------------------------------------------------+------------------------------------+---------------------------+
| Namakwa Diamond Holdings (Pty) Ltd | RSA | 100 |
+----------------------------------------------------+------------------------------------+---------------------------+
| Tidal Diamonds (Pty) Limited | Namibia | 100 |
+----------------------------------------------------+------------------------------------+---------------------------+
| Namakwa Properties Namibia (Pty) Ltd | Namibia | 100 |
+----------------------------------------------------+------------------------------------+---------------------------+
| Namakwa Diamonds Trading (Pty) Limited | RSA | 100 |
+----------------------------------------------------+------------------------------------+---------------------------+
| Namakwa Diamonds Mining North West (Pty) Limited | RSA | 100 |
+----------------------------------------------------+------------------------------------+---------------------------+
| Namakwa Diamonds Mining South Africa (Pty) Limited | RSA | 100 |
+----------------------------------------------------+------------------------------------+---------------------------+
| Albetros Inland Exploration (Pty) Limited | RSA | 100 |
+----------------------------------------------------+------------------------------------+---------------------------+
| Lomlex Mining (Pty) Limited | RSA | 100 |
+----------------------------------------------------+------------------------------------+---------------------------+
| Pypklip Diamante (Pty) Limited | RSA | 100 |
+----------------------------------------------------+------------------------------------+---------------------------+
| Joey Fourie Trust (Pty) Limited | RSA | 100 |
+----------------------------------------------------+------------------------------------+---------------------------+
| Amber Cascades (Pty) Limited | RSA | 100 |
+----------------------------------------------------+------------------------------------+---------------------------+
| Dumela Diamonds (Pty) Limited | RSA | 100 |
+----------------------------------------------------+------------------------------------+---------------------------+
| Big Sky Trading 461 (Pty) Limited | RSA | 100 |
+----------------------------------------------------+------------------------------------+---------------------------+
| DJL Landgoed (Pty) Limited | RSA | 100 |
+----------------------------------------------------+------------------------------------+---------------------------+
| Cinlo (Pty) Ltd | RSA | 100 |
+----------------------------------------------------+------------------------------------+---------------------------+
| Morning Dew Properties (Pty) Limited | RSA | 100 |
+----------------------------------------------------+------------------------------------+---------------------------+
| Praxos (Pty) Ltd | RSA | 100 |
+----------------------------------------------------+------------------------------------+---------------------------+
| Scarlett Queen Properties (Pty) Ltd | RSA | 100 |
+----------------------------------------------------+------------------------------------+---------------------------+
| Central High Trading 58 (Pty) Ltd | RSA | 100 |
+----------------------------------------------------+------------------------------------+---------------------------+
| Counter Point Trading 403 (Pty) Ltd | RSA | 100 |
+----------------------------------------------------+------------------------------------+---------------------------+
| Batavia Trading 46 (Pty) Ltd | RSA | 100 |
+----------------------------------------------------+------------------------------------+---------------------------+
| Spring Green Trading 115 (Pty) Ltd | RSA | 100 |
+----------------------------------------------------+------------------------------------+---------------------------+
| Mirimar Trading 57 (Pty) Ltd | RSA | 100 |
+----------------------------------------------------+------------------------------------+---------------------------+
| River Queen Trading (Pty) Ltd | RSA | 100 |
+----------------------------------------------------+------------------------------------+---------------------------+
| Meondo Trading 72 (Pty) Ltd | RSA | 100 |
+----------------------------------------------------+------------------------------------+---------------------------+
| Monroe Mining (Pty) Ltd | RSA | 100 |
+----------------------------------------------------+------------------------------------+---------------------------+
| Elite Diamond Cutting Works (Pty) Ltd | RSA | 100 |
+----------------------------------------------------+------------------------------------+---------------------------+
| Doornhoek 777 Glaudina (Pty) Ltd | RSA | 100 |
+----------------------------------------------------+------------------------------------+---------------------------+
| Namakwa Diamonds Israel Limited | Israel | 100 |
+----------------------------------------------------+------------------------------------+---------------------------+
| Idada Trading 167 (Pty) Ltd | RSA | 100 |
+----------------------------------------------------+------------------------------------+---------------------------+
* In three of the subsidiaries, incorporated in DRC, one per cent of the
shareholding is held by an employee on behalf of the Group to comply to the
regulatory environment of the country. These one per cent shareholdings are
effectively held by the Group and included in the consolidation of the Group.
For further information please contact:
Namakwa Diamonds - Nico Kruger
Tel: +27 11 334 8886
Taylor Rafferty - Rob Newman
Tel: +44 207 614 2900
Forward-Looking Statements
This announcement includes forward-looking statements that reflect the current
views of the Group's management with respect to future events. These
forward-looking statements include matters that are not historical facts nor are
statements regarding the Group's intentions, beliefs or current expectations
concerning, among other things, the Group's results of operations, financial
condition, liquidity, prospects, growth, strategies, and the industries in which
the group operates. Forward-looking statements are based on current plans,
estimates and projections, and therefore too much reliance should not be placed
upon them. Such statements are subject to risks and uncertainties, most of which
are difficult to predict and are generally beyond the Group's control. The Group
cautions you that forward-looking statements are not guarantees of future
performance and that if risks and uncertainties materialise, or if the
assumptions underlying any of these statements prove incorrect, the Group's
actual results of operations, financial condition and liquidity and the
development of the industry in which the Group operates may materially differ
from those made in, or suggested by, the forward-looking statements contained in
this announcement. In addition, even if the Group's results of operations,
financial condition and liquidity and the development of the industry in which
the Group operates are consistent with the forward-looking statements contained
in this announcement, those results or developments may not be indicative of
results or developments in future periods. Except by the Listing Rules and
applicable law, the Group does not undertake any forward-looking statements to
reflect events that occur or circumstances that arise after the date of this
announcement.
About Namakwa:
Namakwa Diamonds is a unique diamond resource group. Its strategy of backward
integration from its 30 years of beneficiation experience into mining has
created a unique public investment proposition. Namakwa Diamonds has a
diversified portfolio of diamond projects, which include five distinct diamond
resource target areas. These are located in four African countries, namely;
South Africa, the Democratic Republic of Congo, Namibia and Angola. Namakwa's
projects are located within historically prospective geological environments.
Alluvial diamond deposits, including marine, constitute the primary focus of the
company, whilst kimberlite opportunities will be considered if they represent an
advanced stage of development, consistent with Namakwa's philosophy of a short
resource delivery time as provided by its alluvial diamond mines.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR PUUMPCUPBPGR
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