TIDMNAD
RNS Number : 2306V
Namakwa Diamonds Limited
07 July 2009
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July 7, 2009
LSE: NAD
Interim Management Statement for the Period Beginning 1 March 2009 to
6 July 2009
Namakwa Diamonds Limited ('Namakwa' or the 'Company'), a vertically integrated
diamond resource company, today issues its interim management statement for the
eighteen week period from 1 March 2009. Production and financial figures relate
to the quarter beginning 1 March 2009 (Q3 09) and are compared with the previous
quarter (Q2 09) unless stated otherwise.
Highlights
* Produced 4,200 carats in Q3 09 representing a quarter-on-quarter increase of
114%;
* Mining activities in the North West region continue at the Northern Node on a
cash positive basis. All other sites in the region remain on care and
maintenance;
* Two DMS plants commissioned in May 2009 and full scale trial mining commenced in
the DRC. Namakwa is currently the only large scale diamond mining company still
active in the DRC;
* Beneficiation segment sold 44,643 carats of rough diamonds and 487 carats of
polished diamonds at a gross margin of 9% and 18% respectively realising a gross
profit of US$ 1.3 million;
* Inventory focussed towards products in higher demand; Greater emphasis placed on
polishing more rough diamond inventory;
* Balance sheet remains strong with US$ 48.9 million in net working capital with
cash on hand of US$ 18.0 million as at 31 May 2009. As of today, the company has
US$ 18.9 million cash on hand.
Diamond Sector Update
The global economic weakness continues to impact the entire diamond value chain
from rough producers through to the retail buyers. The period under review saw
an increase in rough prices and to a lesser extent polished prices, as well as
an increase in liquidity and volumes, but the sustainability of these trends
remains unclear. Global diamond production for the first half of 2009 is
estimated to be approximately 90% below the corresponding period of 2008 which
should assist with the recovery of rough and polished diamond prices.
Rough Pricing Environment
Although prices for certain categories of rough diamonds recovered to levels
close to those achieved prior to the collapse, Namakwa believes both rough and
polished prices will remain volatile until fundamental retail demand
strengthens.
Rough volumes are expected to come onto the market from Russia and other African
producers, which could put renewed pressure on prices. The potential recovery in
production from the larger diamond mines that curtailed production in Q4 08
remains uncertain.
Polished Pricing Environment
Polished diamond prices have seen an improvement since February 2009, but
remarkably less than has been the case for rough diamonds. The continued
weakness in the US retail market makes it very difficult for the wholesale
polish trade to raise prices in line with the bullish pattern seen in rough
diamonds. Overall, the time frame for recovery in polished prices remain
uncertain with current buying and selling mainly taking place in the dealer
market with limited activity in the retail segment.
According to Polishedprices.com, the weekly index is currently 16.8% lower than
this time last year, and has fallen 7.1% since the start of the year. Namakwa's
experience is that the decline in polished prices did not extend beyond March
2009.
Mining Overview
Activities in the North West
During the period under review, Namakwa concentrated its mining activities on
the Northern Node and employed contract miners on a number of other sites. All
other sites in the region remained on care and maintenance and activities were
limited to the planned rehabilitation work.
During the period under review, Namakwa mined 6,195 carats of which 4,200 carats
were mined in Q3 09 (Q2 09: 1,957 carats). Overall, the Company's own production
at the North Node was 2,791 carats, with the remaining 3,404 carats produced by
contractors. Full production at the Northern Node for Q4 09 is expected to
increase over 39% quarter-on-quarter to 5,850 carats, of which 2,550 carats are
expected from own production and 3,300 carats from contractor contribution.
The grade achieved at the Northern Node for Q3 09 was 0.88 cpht and the cash
cost per tonne for the quarter was R 27.21 (US$ 2.97) although when corporate
costs are excluded this figure reduces to R 23.22 (US$ 2.54). Both the stated
costs exclude any costs relating to the non-producing nodes. Recovered grade for
June was 1.39 cpht. Internal valuation of rough production for the quarter was
US$ 246 p.c. in March 2009, US$ 295 p.c. in April 2009 and US$ 460 p.c. in May
2009.
During April and May 2009, a geological and equipment analysis of the resources
in the North West Province was undertaken with a view to optimising the return
on the Company's assets given the constraints of the current economic climate.
Recommendations based on the finding will be made by the Management team to the
Board of Directors as to the optimal application of these assets and geological
resources to maximise shareholder value.
Capital Project: South East Node (Oersonskraal)
The capital project at the South East Node, which comprises the construction and
commissioning of a 300 tph Dense Media Separation (DMS) plant, is nearing
completion and is on track for commissioning during August 2009. An additional
30 million tonnes of gravel have been identified as feed for this plant and the
project is expected to become the flagship for the North West operations of the
Company. The project is being constructed and commissioned using the internal
skills and resources Namakwa has at its disposal.
Activities in the DRC
The DRC project has now been completed on time and within budget. Namakwa is
currently the only large scale diamond company still active in the DRC and will
consider expanding its base subject to diamond price prospects.
One mobile 10tph DMS sampling plant was commissioned in December 2008 and two 30
tph DMS plants were commissioned in May 2009 and trial mining commenced in the
indicated areas as per the geology reports that are currently being verified by
Venmyn. During Q3 09, 4,010 carats were recovered from these areas at a grade
ranging from 5.43 cpht to 40 cpht at an internal valuation of US$ 70 per
carat. The total cash cost, including the DMS plant commissioning cost, incurred
in the quarter was US$ 1.2 million, which increase to US$ 1.6 million taking
into account diesel still in inventory. Unit costs during the quarter were high
due to the commissioning cost being expensed, the production build-up and the
low volumes mined in the trial mining phase.
To date in excess of 120,000 tons have been processed from the two concessions
that are actively being trial mined. Results to date demonstrate Namakwa's
ability to develop world class alluvial operations in remote areas. The DRC
operation will continue to be evaluated based on the results of the trial mining
as well as rough diamond prices. The carats recovered during Q3 09 relates to
production utilising mainly the sample plant and production will be ramped up in
Q4 09 following the commissioning of the two DMS plants during May 2009.
Activities in Namibia
Exploration of the Tidal concession areas is being pursued and discussions with
a contractor are underway. Namakwa will update the market with any developments
in due course.
Beneficiation Overview
For the period under review, Namakwa sold 44,643 carats of rough diamonds and
487 carats of polished diamonds at a gross margin of 9% and 18% respectively,
realising a gross profit of US$ 1.3 million. The average selling price of rough
and polished diamonds was US$ 199 per carat and US$ 6,002 per
carat respectively.
During the same period Namakwa acquired 22,450 carats of rough diamonds from
third parties at an average cost of $220 per carat.
As previously reported, Namakwa increased the polished volumes in its inventory
in order to maximise value while the market experienced disproportionately low
rough diamond prices.
Working Capital and Capital Expenditure
Namakwa continues to focus on preserving cash and working capital under the
current depressed market conditions. At 31 May 2009, net working capital
amounted to US$ 48.9 million with cash on hand of US$ 18.0 million and diamond
inventory valued at US$ 22.3 million. Since the quarter end cash on hand has
increased to US$ 18.9 million.
The decrease in cash during the quarter comprises primarily of the following:
* Diamond sales less diamond purchases - US$ 1.8 million;
* Forex gain - US$ 0.5 million
* Capital expenditure - (US$ 0.5 million);
* Beneficiation overhead costs - (US$ 0.4 million)
* Rehabilitation and South East Project costs - (US$0.9 million);
* DRC costs including commissioning costs - (US$1.6 million);
* North West mining costs - (US$0.4 million); and
* Corporate costs - (US$1.8 million).
Apart from the final commissioning cost of the South East Node DMS project,
Namakwa has completed its capital programmes in the DRC and the
North West Province and no significant capital expenditure is currently
envisaged.
Outlook
The results for the period under review demonstrate the flexibility offered by
Namakwa's business model and vindicates the decision to alter the composition of
the inventory at the beginning of the year. Cash preservation remains a critical
focus and the Company will continue to be cautious in terms of expanding mining
production until rough diamond prices allow for attractive margins on a
sustainable level.
Additionally, the lack of access to credit continues to facilitate attractive
beneficiation and trading opportunities and Namakwa's footprint across the
diamond value chain also creates a number of potential corporate opportunities
which the Company will carefully assess.
________________________________________________________________________
For further information please contact:
Namakwa Diamonds - Nico Kruger
Tel: +27 11 334 8886
Taylor Rafferty - Rob Newman
Tel: +44 207 614 2900
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
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