Key points
- The company produced a quarterly record of 116,100 carats in the quarter ended March 31, 1999 from Feature 019 in its Luderitz Bay mining licence.
- The 1999 production target was raised from 150,000 carats to 200,000 carats, with total production since April 1998 reaching 242,170 carats.
- For the three months ended Feb. 28, 1999, earnings were $5.2-million (U.S.), or 14 U.S. cents per share, compared with a loss of $3.1-million a year earlier.
- Diamond sales of 81,800 carats generated revenue of $11.7-million (U.S.) at an average realized price of $143 (U.S.) per carat, up 7 per cent from the prior quarter.
For the quarter ended March 31, 1999, mining activities continued in Feature 019 in the company’s
Luderitz Bay mining licence. A quarterly record of 116,100 carats was
produced.
Since the start of operation last year, diamond production has
consistently exceeded expectations based on the original resource grade
estimates derived from the sampling program results. Review of production
information indicates that the resource potential of the deposit has been
underestimated.
The company has therefore increased its production target for 1999 from
150,000 carats to 200,000 carats. The revised target takes account of further
exploration and a planned two-month port call in the third quarter for vessel
classification, routine maintenance and operational enhancements.
According to marine and coastal geoconsultants, two main factors
contributed to the underestimation of the deposit’s potential. The original
grade calculation method was based on 10 square miles point sampling results but for
geostatistical estimation purposes did not incorporate the grades of the
larger sized 100-square-mile bulk samples, which were significantly higher.
Secondly, the technical limitations of the Namrod sampling tool did not enable
a second layer of mineralization in Feature 019 to be fully sampled.
The NamSSol mining system is able to mine both of the mineralized layers.
Mining experience indicates that these layers are common in the area mined to
date, but the extent has not been defined.
The average diamond size of 0.33 of a carat was in line with expectations
derived from sampling information. The stone size ranged from 0.1 of a carat to 10.3 carats.
Operational performance of the NamSSol mining system continued to meet
expectations.
A total of 242,170 carats has been mined since the start of operation in
April 1998. This result firmly establishes the company’s expertise in marine
diamond mining and the quality of its resource.
Exploration Activities
In the final week of the quarter, a three-week trench bulk sampling
program commenced in Feature 022 of the Hottentot Bay Grant using NamSSol
deployed from MV Kovambo with the objective to upgrade the existing inferred
resource of 400,000 carats. The program comprises 10 sampling trenches of
13 metres wide in lengths varying from 40 metres to 200 metres. Results will be reported on
completion of evaluation.
Geotechnical surveys were conducted on Feature 020 of the Luderitz Bay
mining licence. Ten soil penetration tests were carried out, providing
additional information on the geotechnical requirements for NamSSol II.
Financial Results
For the three months ended Feb. 28, 1999, earnings were $5.2-million (U.S.) (1998: loss of $3.1-million (U.S.)). Earnings per share were 14 U.S. cents (1998: loss of eight U.S. cents). The
company’s cash position at quarter end was $7.6-million (U.S.) (1998: $6.4-million).
Diamond sales of 81,800 carats (1998: nil) generated revenues of $11.7-million (U.S.) (1998: nil). The average realized diamond price was $143 (U.S.) per carat,
which represents an increase of 7 per cent on the previous quarter ended December
1998. Diamond stocks at quarter end were 64,800 carats (1998: nil). Sales of
these stocks are expected to generate additional gross revenues in excess of
$9-million (U.S.).
Total costs were $6.6-million (U.S.) (1998: $3.3-million (U.S.)) which include
operating costs of $3.9-million (U.S.) (1998: nil), marketing costs of $245,000 (U.S.) (1998: nil), corporate administration and support costs of $1.1-million (U.S.) (1998: $1.3-million (U.S.)).
The management contract of Alexkor, the South African state-owned diamond
mine, for which the company tendered, was awarded to a consortium of South
African and overseas interests.
Outlook
For the current year production is now expected to be 200,000 carats. The
revised target takes account of further exploration and a planned two-month
port call in the third quarter for vessel classification, routine maintenance
and operational enhancements.
The NamSSol II project progressed satisfactorily during the quarter. The
estimated total project cost is $25-million (U.S.). The company intends to finance
the capital cost through a mix of cash flow and debt.
STATEMENT OF OPERATIONS
(thousands of U.S. dollars)
Three months Three months
ended ended
03/31/99 02/29/98
Income
Revenue from
diamond sales $ 11,662 $ –
Interest received 77 141
Gain on sale of
marketable
securities – 8
——— ———
11,739 149
——— ———
Expenses
Direct production
costs 3,949 –
Marketing costs 245 –
General office
costs, including
salaries 1,095 1,250
General exploration
and development
costs – 1,909
Amortization
Capital assets 1,257 116
Good will 3 3
Interest payable 8 11
——— ———
(6,557) (3,289)
——— ———
Earnings (loss) $ 5,182 $ (3,140)
========= =========
Earnings (loss)
per share 14 cents (8 cents)
WARNING: The company relies upon litigation protection for “forward-looking” statements.
