“The weaker-than-expected diamond market, together with our lower-than-anticipated recovery of higher-value diamonds, has put pressure on our cash reserves and meant that we have had to raise additional equity and restructure our debt in order to be able to adopt a revised mining plan,” Firestone CEO Stuart Brown said.
“That plan “seeks to maximize cash flow in the shorter term while we address the issues affecting value recovered,” he added.
To raise the cash it needs, Aim-listed Firestone will issue new shares at $0.13, a 49% discount to its November 30 closing stock price of $0.27. The company has also reached an agreement with its lender, the South Africa-based ABSA Bank, to defer debt repayments from January 1, 2018, to June 30, 2019.
In addition to paying back those debts, the company will use the extra money to fund mining, and to provide “headroom” while prices remain subdued, enabling it to get a better understanding of the mine’s ore body, it said.
Rough fetched $77 per carat in its fourth fiscal quarter, bringing the total average for the financial year that ended June 30 to $90 per carat, compared with an original estimate of $107 per carat, the Firestone said.
As a result of the lower-than-expected prices, incurred a loss of $120.3 million for the fiscal year ( in the previous year the company recorded a loss of $6.4 million the previous year).
The miner also reduced Liqhobong’s annual production estimate to 800,000 carats from 1 million carats.
Under the new mining plan, Firestone estimates the asset will remain in operation for nine years, compared with a previous projection of 14 years. It also lowered its estimate of the total volume of rough diamonds in the mine to 7.7 million carats from 13.9 million carats.
Production at Liqhobong started last year, with the first sale taking place in February of this year. During the latest fiscal year, Firestone sold 310,376 carats for a total of $27.8 million.