Firestone Diamonds, which mines the Liqhobong mine in Lesotho (75% Firestone, 25% government of Lesotho) reports an increase in production during the third fiscal quarter ended 31 March 2018, as the higher grade led to a 6.6% rise in diamond recoveries despite challenging conditions due to above average rainfall during the wet season. The young miner recovered 192,604 carats (Q2 180,709 carats, Q1: 199,007 carats), from 869,126 tons of ore treated (Q2: 963,213 tons), reflecting the treatment of higher grade ore yielding 22.2 carats per hundred tons ("cpht"), higher than 18.8 cpht in Q2 and 20.6 cpht YTD. A further increase in grade is expected in the final quarter of FY2018 as mining of higher grade areas of the pit resumes. During the quarter, Firestone recovered 93 specials (plus 10.8 carats) (Q2: 80) which, they say, "was encouraging although, overall, the average quality still remained somewhat below expectation."
A total of 217,380 carats were sold in Antwerp during the quarter (Q2: 156,942 carats), with the sales achieving an average value of US$81 per carat (Q2: US$80 per carat), yielding proceeds of US$17.6 million (Q2: US$12.5 million). They note that the rough diamond market continued to strengthen during the first quarter of 2018, with confidence returning after a successful retail season. Very competitive bidding was seen at the sales in Antwerp, together with continued price recovery on the lower category run of mine goods. Supply of lower value goods across the market is still plentiful but better quality goods are in demand as are fancy colours, evidenced by the strong demand for the special fancy pink and yellow stones that were offered by Liqhobong.
Cautious optimism in the market, challenges for operations
Firestone further notes that positive retail numbers from the US and China give rise to cautious optimism on rough diamond pricing for the balance of 2018. "This is of course predicated on the supply of rough diamonds remaining in balance with demand. If major producers remain responsible and global macro conditions remain supportive then there is some cause for cautious optimism that the confidence in the rough market will continue through the remainder of the year with sustained improvement in rough prices", the company states. CEO Stuart Brown adds, "Despite experiencing several disruptions during the quarter due to heavy, above average rainfall, the orebody has started to deliver the higher grades we have been expecting and so carats produced increased compared with the previous quarter. In the first nine months of the financial year, Liqhobong has recovered fewer carats than planned due to the adverse weather and higher water levels in the main pit, particularly in February and March, which restricted access to the higher grade ore blocks. We still expect to achieve annual production at the lower end of guidance of 800,000 to 850,000 carats, as mining progresses in the higher grade ore."
As announced in December 2017, Firestone is pursuing a revised mine plan with the objectives of delivering the best returns in the medium term at low risk whilst at the same time offering the optionality of taking advantage of the longer life of mine potential of the Liqhobong orebody should realised diamond values increase or should there be a sustained improvement in market conditions. They say they are making good progress on delivering this plan, and in the first three months of the revised plan they realised slightly better values of US$81 per carat due to a combination of better rough market conditions and the recovery of a few exceptionally valuable small fancy coloured stones. The achieved prices are up from a Q1 low of US$69 per carat, and gradually moving toward the original estimate of an average base value of $107 per carat. Firestone continues to plan for mining to progress across the pit over the next 15 months, which will provide a truer representation of diamond quality and pricing than has been possible from the access to limited production areas during the ramp-up period.