Key points
- Net profit for the quarter was $1.2-million (U.S.), equivalent to three cents per share.
- Diamond production rose 41 per cent to 42,600 carats, bringing calendar-year-to-date production above 100,000 carats.
- The company placed orders for long lead items for NamSSol II, a second mining system targeting 185,000 carats of annual production capability, expected to be operational in early 2000.
- Tokyo Sexwale, former Premier of Gauteng Province in South Africa, joined the company’s board of directors in October 1998.
Following are the company’s production and profits for the quarter ended
Nov. 30, 1998.
Highlights for the Quarter
Net profit for the quarter was $1.2-million (U.S.); equivalent to three cents per share;
Production for the quarter was 42,600 carats; an increase of 41 per cent;
Total diamond production for the calendar year to date exceeded
100,000 carats;
Orders were placed for the long lead items for an additional mining
system;
Tokyo Sexwale joined the board of directors.
SALES AND PRODUCTION RESULTS
Q1 Q2
1998 1998
Diamonds produced
(carats) 42,600 30,300
Average diamond
size (carats) 0.37 0.39
Carats sold 45,500 29,300
Sales value (U.S.$) 6,016,000 4,806,300
Average price per
carat (U.S.$) 132 164
Stock at quarter
end (carats) 20,500 23,400
All figures rounded to the nearest 100
Review of Operations
The company’s mining activities continued in the northern area of Feature
19 of the Koichab prospect. Total production increased by 41 per cent to 42,600
carats, compared with 30,300 carats recovered in the previous quarter. In the
eight months since production commenced, a total of 100,000 carats has been mined.
Operational skill of the NamSSol mining team continued to rise during the
period. The objective of mining 1,000 square metres per day was obtained on repeated
occasions with a record achieved of 1,400 square metres mined in one day.
Orders have been placed on the long-lead items for NamSSol II, the
company’s second mining system, which has a target production capability of
185,000 carats. With two mining systems in operation, the company anticipates
that annualized diamond production will exceed 300,000 carats. NamSSol II is
expected to be operational in early 2000 and will be built in Cape Town. The
estimated project cost is $20-million (U.S.). The company intends to finance the
capital cost through a mix of cash flow and debt.
Financial Review
The company’s profit for the year to date is $2,240,000 (U.S.), which includes
profit for the quarter of $1,214,000 (U.S.), or a profit per share of six U.S. cents for
the financial year to date. At quarter end, the company’s net cash position
was $2,635,000 (U.S.).
Diamond sales during the quarter generated $6.02-million (previous
quarter: $4.80-million). The average diamond price at $132 reflects a decline
of 20 per cent on the previous quarter. Despite the price adjustment, the company is
encouraged by steady market demand for its high quality gem production.
Diamond stocks at quarter end were 20,500.
Costs for the period were in line with expectations.
Corporate Activities
Tokyo Sexwale was appointed to the board in October 1998. Mr. Sexwale is
the former Premier of Gauteng Province in South Africa and is a former member
of the African National Congress (ANC) – Executive Committee. He brings a
unique understanding of political and stakeholder issues.
Along with two South African diamond mining companies, Namco has
qualified for the final round in a bid for the management contract and
acquisition of deferred equity in Alexkor Ltd., a diamond mine owned by the
South African government. Historical production from the coastal deposits
totals 7.5 million carats, with current production of circa 150,000 carats per
year. In addition to its 100km coastal strip, Alexkor holds eight marine
concessions, favourably at and near the mouth of the Orange River. The
company believes that Alexkor has significant exploration potential for its
land and marine operations. It is expected that the government will announce
its decision early next year.
The board has approved a proposal to change the company’s financial year
from May 31 to Dec. 31. The company will produce an annual report for
the seven month period ending Dec. 31, 1998.
The company has implemented a program to review its systems in order to
minimize the potential impact of the Year 2000 computer problem on
its operations. The review has confirmed that major aspects of the operation
such as the NamSSol mining system are Y2K compliant. The review program is
continuing, and to date, no potential material disruptions to the company’s
operations have been identified.
Outlook
The company is well-positioned to achieve its target output of 150,000
carats on an annualized basis. The decision to proceed with the construction
of a second mining system reflects confidence in the operation and in the
potential of the company’s mining areas.
