Firestone Increases Sales in H1 2019 Despite Soft Prices

Mining and Exploration
01/04/2019 12:51

Firestone Diamonds increased its first half (ended 31 December 2018) revenue to $27.4 million from three sales at First Element tender house in Antwerp despite soft prices, the miner announced late last week. Firestone managed to top the $26.0 million from four sales in H1 last year through an increase in the volume of carats sold, while the average value per carat fell 4% to $71 from $74 per carat in H1 2018, impacted by prices for smaller, lower value diamonds. The miner also managed to decrease it loss for the period to $6.6 million from $7.8 million in H1 2018.

The miner's H1 production from the Liqhobong mine in Lesotho increased nearly 23% to 465,680 carats compared with 379,716 carats in H1 2018 as a result of a higher average grade of 24.6 carats per hundred tonnes ("cpht") in the period (H1 2018: 19.9 cpht) mainly due to treating more of the higher grade ore blocks in the southern part of the open pit. The recoveries included the largest diamond Firestone has unearthed to date, a 326 carat light yellow makeable stone. 

The demand for smaller diamonds, below 3 grainers (<0.66ct), remained subdued during the first 6 months of the financial year, mainly as a result of pressure on the Indian midstream. The lower average value realised during the period was due mainly to the decrease in prices for run of mine production (minus 3 grainers), which comprises approximately 80% of Liqhobong's production, as a result of pressure on the Indian midstream due to a weaker local currency, high inventory levels and reduced lending into the industry. Pricing for larger, more valuable diamonds remained robust during the period as evidenced by a 68 carat white makeable which sold for more than US$900k. 

"The second half of 2018 saw a global price slump in the smaller, lower value goods which negatively impacted our average dollar per carat achieved," explained Firestone CEO Paul Bosma. "Since then, prices have stabilised at these lower levels and we are looking forward to some improvement once inventory levels in the midstream of the diamond market normalise. Production is on track to meet guidance and we once again did well to manage costs, which are well below full year guidance." At the most recent sale which concluded on 22 March in Antwerp, the company acheived an average value of $90 per carat was realised, resulting in a higher average value realised of $80 for the third quarter of the financial year, and US$74 per carat for the first nine months of the financial year. 

Firestone is also shelving a proposed extension of the Liqhobong mine because it would not be economically viable at this stage. Results from a Life of Mine plan indicated that while a Cut 3 could increase the life of mine by 3 years and result in 40% more carats compared to the current 8 year mine plan, at the current average diamond values realised and based on current economic assumptions, the cost would outweigh the benefit.