Financial results for the second quarter ended June 30, 2001, were as follows:
All amounts reported in U.S. dollars.
Namibian Minerals has stabilized the company following the NamSSol accident and the provisional liquidation of certain subsidiaries in the first quarter. Second quarter results reflect the disruption to operations as a result of provisional liquidation.
Progress on company recovery
A number of milestones were achieved during the second quarter and early in the third quarter:
Gross proceeds of $29.6-million (U.S.) were successfully raised to help restore the company’s financial stability and diamond manufacturers, the Leviev Group, were introduced as the new major shareholder.
Limited diamond production resumed from MV Ya Toivo in April and MV Namibian Gem returned to operation this week.
All subsidiaries were discharged from provisional liquidation, following agreement of terms to repay creditors of those subsidiaries in full.
The company’s all-risks policy claim covering loss and damage to the NamSSol mining system was accepted and a payment on account was made. The company progressed discussions with underwriters of the business interruption claim.
Exploration resumed on board MV Zacharias for resource development and improved mine planning.
The board of directors was strengthened by the election of five new members and a new chief financial officer was appointed.
In response to the extended period of provisional liquidation the company has developed a recovery program to allow the resumption of normal operations and stabilizing of its financial position. This includes measures to optimize production, cost-cutting initiatives, seeking additional financial support and rescheduling proposals to senior lenders.
Financial results
A loss for the second quarter of $12.9-million or 17 cents per share compared with earnings of $1.0-million or two cents per share in 2000. This reflects that only one vessel operated for part of the quarter at limited capacity, while incurring the cost of maintaining four vessels. Direct production costs in the second quarter were $8.4-million compared with $4.6-million in the second quarter of 2000 as a result of the additional operating costs for MV Ya Toivo. General office costs for the quarter were reduced by over 30 per cent to $1.0-million, compared with $1.5-million in 2000 and $1.4-million in the first quarter of 2001, following completion of the capital projects and provisional liquidation. The average realized diamond price during the quarter was $164 (2000: $187), reflecting current global market conditions. However demand for the company’s high-quality production remains strong.
In the first six months, the loss was $25.1-million or 40 cents per share, compared with earnings of $3.3-million or seven cents per share in 2000. Revenues for the first half were $6.2-million compared with $21.9-million in 2000. Direct production costs rose to $19.2-million compared with $10.4-million a year earlier. These include $1.9-million of revenue from diamond stocks which were sold during the period. All operational costs in the first six months were fully expensed.
As previously announced, gross proceeds of $27.0-million were successfully raised in the first half of 2001. Subsequent to second quarter-end, in line with previous commitments, the Leviev Group made available a $2.6-million credit facility to the company. At the end of the first half, the company had $7.7-million in cash (2000: $4.4-million) and $48.9-million in bank debt (2000: $54.2-million). In addition, $5.6-million was secured to provide guarantees for the owners of MV Ya Toivo and Zacharias.
“The losses reflect the huge disruption which the NamSSol accident and subsequent provisional liquidation have caused to our business. We expect continued losses for the rest of the year while we work on restabilising the company,” said Alastair Holberton.
Operating results
Diamond production for the first half was 24,500 carats, including 13,800 carats in the second quarter. Production buildup has been slow due to the protracted nature of the provisional liquidation process and technical impediments associated with the commissioning of a new mining system. The company believes that production levels will improve in the second half of the year. Third quarter production has already exceeded second quarter levels. MV Namibian Gem returned to operation this week and is expected to make a contribution to production in the third quarter.
Outlook
The resumption of mining and exploration activities and the discharge of all companies from provisional liquidation are significant developments for the company. Although still in its early stage of operation, MV Ya Toivo is demonstrating its potential as a new strong contributor to the company’s production profile. The resumption of sampling for resource development and improved mine planning, now delayed by over a year, should also have a positive impact on the company’s development.
The company is focused on continuing its discussions with underwriters of the business interruption policy regarding recovery for the NamSSol accident. The company’s legal and professional counsel have advised that the claim is soundly based.
“We are seeing improvements in diamond production and through the implementation of our recovery program, with the ongoing support of all stakeholders, we are moving forward to rebuild the company’s future,” said Alastair Holberton, Namco’s chairman and chief executive officer.
WARNING: The company relies upon litigation protection for “forward-looking” statements.
CONSOLIDATED STATEMENT OF OPERATIONS
AND RETAINED EARNINGS
Three months ended June 30
(thousands of U.S. dollars)
2001 2000
Income
Revenue from
diamond sales $ 1,482 $ 9,736
Interest earned 92 194
Gain on marketable
securities (7) 25
——– ——–
1,567 9,955
——– ——–
Expenses
Direct
production costs 8,435 4,582
Royalty payment 120 802
Marketing costs 41 240
General office costs,
including salaries 1,036 1,547
Corporate
finance fee – –
Provisional
liquidation costs 700 –
Amortization
capital assets 2,286 1,089
Deferred costs 372 61
Interest paid
Long-term debt 1,048 589
Other (3) 30
——– ——–
(14,035) (8,940)
——– ——–
Earnings (loss)
for the period
before taxes
and good will (12,468) 1,015
Recovery of
income taxes 200 605
——– ——–
Earnings (loss)
for the period
before good will (12,268) 1,620
Good will
amortization (603) (582)
——– ——–
Earnings (loss)
for the period (12,871) 1,038
Retained earnings
(deficit) —
beginning of
period (7,115) 7,742
Dividend for
period (nil,
June 30, 2000:
three cents
per share) – (1,406)
——– ——–
Retained earnings
(deficit) — end
of period $(19,986) $ 7,374
======== ========
Basic earnings
(loss) per share
for the period
before good will (0.16) 0.035
Basic earnings
(loss) per share
for the period
after good will (0.17) 0.02
Fully diluted
earnings (loss)
per share for
the period (0.17) 0.02
CONSOLIDATED STATEMENT OF OPERATIONS
AND RETAINED EARNINGS
Six months ended June 30
(thousands of U.S. dollars)
2001 2000
Income
Revenue from
diamond sales $ 6,210 $ 21,902
Interest earned 114 479
Gain on marketable
securities – 25
——– ——–
6,324 22,406
——– ——–
Expenses
Direct
production costs 19,226 10,432
Royalty payment 449 1,693
Marketing costs 268 437
General office costs,
including salaries 2,472 2,600
Corporate
finance fee 280 –
Provisional
liquidation costs 1,400 –
Amortization
capital assets 3,621 2,225
Deferred costs 500 124
Interest paid
Long-term debt 2,324 1,253
Other 62 30
——– ——–
(30,602) (18,794)
——– ——–
Earnings (loss)
for the period
before taxes
and good will (24,278) 3,612
Recovery of
income taxes 400 815
——– ——–
Earnings (loss)
for the period
before good will (23,878) 4,427
Good will
amortization (1,206) (1,144)
——– ——–
Earnings (loss)
for the period (25,084) 3,283
Retained earnings
(deficit) —
beginning of
period 5,098 5,497
Dividend for
period (nil,
June 30, 2000:
three cents
per share) – (1,406)
——– ——–
Retained earnings
(deficit) — end
of period $(19,986) $ 7,374
======== ========
Basic earnings
(loss) per share
for the period
before good will (0.38) 0.095
Basic earnings
(loss) per share
for the period
after good will (0.40) 0.07
Fully diluted
earnings (loss)
per share for
the period (0.40) 0.07
