Improved diamond production for third quarter 2000 attributed to all three of
the company’s mining vessels being in operation and the effect of technical enhancements
carried out during the year.
Third quarter highlights
Diamond production rose 42 per cent from the second quarter to 65,000 carats; the company is on track for higher second half production levels.
A loss of $665,000 (U.S.) was due to exceptional costs of operating
improvements and a non-cash write-off of relinquished concessions.
Operating cash flow increased 70 per cent from the second quarter to
$1.7-million (U.S.).
Nine-month production from two airlift vessels outperformed historic
annual production levels, realizing the value of last year’s ODM
acquisition.
Construction of Nam 2 was completed and the project is on schedule to
start operation in Namibia by year-end.
Exploration started off the coast of Namibia including concessions
acquired in the ODM acquisition; to date less than 3 per cent of the
concessions have been explored in detail.
Third quarter diamond production rose 42 per cent to 65,000 carats (1999: 15,700
carats) from the previous quarter (45,600 carats). A loss of $665,000 (U.S.), or
one U.S. cent per share for the third quarter (1999: profit of $5.4-million (U.S.),
14 U.S. cents per share) was primarily due to exceptional costs of engineering and
operating improvements to the fleet. Earnings were also affected by a one-time
non-cash write-off of $428,000 (U.S.) for relinquished concession areas in South
Africa. Third quarter diamond sales of 58,100 carats (1999: 78,100 carats)
generated revenues of $9.3-million (U.S.) (1999: $12.4-million). After an
exceptionally strong first half year in the diamond market, the average
realized diamond price for the quarter was $160 (U.S.) per carat (1999: $159 per
carat). Namco produces high-quality gem diamonds and sales prices have
increased post quarter end.
For the nine months ended Sept. 30, 2000, total diamond production was
163,500 carats, compared with 207,800 carats a year ago. Earnings for the nine
months before amortization of good will were $4.3-million (U.S.), nine U.S. cents per share
(1999: $16-million (U.S.), 42 U.S. cents per share) and postamortization of good will
were $2.6-million (U.S.), six U.S. cents per share (1999: $16-million (U.S.), 42 U.S. cents per
share), on revenues of $31.2-million (U.S.) (1999: $34.4-million (U.S.)). The average
realized diamond price rose 19 per cent to $176 (U.S.) per carat from $150 (U.S.) per carat last
year. Operating cash flow for the nine months was significantly down at $7.4-million (U.S.) compared with $20.6-million (U.S.) in 1999. Direct production costs of
$14.8-million (U.S.) (1999: $9.7-million (U.S.)) reflect the increase in Namco’s fleet
from one to three production vessels while general office costs of
$4.3-million (U.S.) were in line with expectations. At period end, the company had
$9.1-million (U.S.) in cash, with diamonds stocks of 19,500 carats, compared with
$3-million (U.S.) in cash and stocks of 7,500 carats a year ago.
“Diamond production is back on track with all three vessels in operation
during the quarter,” said chairman and chief executive officer Alastair Holberton. “After a year
of consolidation and investment we have the foundation for future growth.”
During the quarter Namco made excellent progress on the development of
the new mining system Nam 2 and vessel MV Ya Toivo. Construction and dry
testing of Nam 2 is complete, with the first subsea testing scheduled to take
place this month. Installation of Nam 2’s launch and recovery unit and
processing plant is on schedule and MV Ya Toivo is on target to sail to
Namibia before year-end. Expenditure on the major capital items totalled
$6.5-million (U.S.) on the mining system, $13-million (U.S.) on the processing plant and
$8-million (U.S.) on upgrading the vessel, including the launch and recovery unit.
Nam 2 is expected to contribute substantially to the company’s production
growth and profitability in 2001 with greater mining rates and throughput
capacity (1.5 million cubic metres per year compared with 0.7 million cubic metres per year
from the present NamSSol seabed crawler). A number of productivity
enhancements will allow for operation in a much greater variety of geological
and mining conditions.
Construction of Namco’s new exploration tool was also completed during
third quarter. An exploration vessel MV Zacharias, chartered for five years,
is equipped with a range of exploration equipment including the new drilling
system, an airlift sampling tool, a grab sampler and a vibrocorer. As
previously advised, capital expenditure was $8.2-million (U.S.). A total of 65 of 163
prospective geological features has been prioritized, concentrating on the
inner continental shelf in water depths to 100 metres. Sampling with the
airlift tool started postquarter end and the new drilling system is expected
to commence operation in November. The program’s objective is to upgrade
diamond resources for future mine planning.
During the quarter Namco reduced its total concession holdings to
approximately 18,000 square kilometres. At the present time, the company believes its
major strategic focus is the development of its inner shelf concessions (water
depths to 100 metres), while the D concessions returned to the South African
government were in deeper waters (250 to 500 metres). Namco is the only
company to have specifically designed and successfully operated large-scale
technology for the inner shelf geological conditions. The company’s strategy
is to lower the unit cost of production to develop further this prospective
region.
The company is focused on optimizing diamond production, reducing
operating and support costs and in particular, improving liquidity, as the
integration of the ODM takeover and the substantial capital expenditure
programs of 2000 are completed.
WARNING: The company relies upon litigation protection for “forward-looking” statements.
CONSOLIDATED STATEMENT OF OPERATIONS
AND RETAINED EARNINGS (DEFICIT)
Nine months ended Sept. 30
(U.S. dollars)
2000 1999
Income
Revenue from
diamond sales $ 31,175 $ 34,390
Interest earned 634 250
Gain on
marketable
securities 31 324
From affiliate – 100
——— ———
31,840 35,064
——— ———
Expenses
Direct
production costs 14,838 9,683
Royalty payment 2,490 2,976
Marketing costs 705 701
General office
costs, including
salaries 4,300 2,948
Amortization
Capital assets 3,504 2,633
Exploration and
development costs 428 –
Deferred costs 187 –
Interest paid 2,073 83
——— ———
(28,525) (19,024)
——— ———
Earnings for the
period before
taxes and
good will 3,315 16,040
Recovery of
income taxes 1,019 –
——— ———
Earnings for the
period before
good will 4,334 16,040
Good will charged (1,716) (9)
——— ———
Earnings for
the period 2,618 16,031
Retained earnings
(deficit)
Beginning of
period 5,497 (10,607)
Accretion on
equity component of
exchangeable
debenture – (189)
Dividend for
period ($0.03
per share, 1999:
$0.02 per share) (1,406) (758)
——— ———
Retained earnings
End of period $ 6,709 $ 4,477
========= =========
Basic earnings per
share for the
period before
good will 0.09 0.42
Basic earnings
per share for the
period after
good will 0.06 0.42
