FIRESTONE Diamonds was in survival mode in which it would delist and reduce the size of its board in order to slash costs.
This was the sobering news from Paul Bosma, CEO of Firestone Diamonds, in a second quarter update earlier this week in which the company cut its diamond production forecast 12% for its 2020 financial year following mine interruptions for most of October.
Guidance has been adjusted to between 720,000 to 850,000 carats down about 100,000 carats on its previous estimate.
Power to Firestone Diamonds’ Liqhobong mine in Lesotho was interrupted for 25 days from October 1 resulting in a shutdown of the processing plant. The mine ran on generators until the beginning of December when grid power was restored.
But the exercise proved expensive. Operating costs for the quarter were $1.1m higher owing to diesel generator rent and running costs. The total impact of the power disruption to the business was estimated to be $4.6m.
“The unexpected power disruption had a devastating impact on production and revenue generation,” said Bosma in the second quarter update. The situation had been ‘salvaged’ using diesel generators, he said.
“As a result of the power disruption, we have reduced our guidance for the year in respect of diamond recoveries and ore tonnes treated,” he said.
The company’s focus now sat squarely on survival. It has set out plans to delist from London’s Alternative Investment Market and reduce the size of its board.
“Due to the production setback and continued lacklustre market conditions, the board has decided that it is imperative that it does all it can to reduce costs in order to survive the prolonged downturn,” said Bosma.
He added that progress had been made with lenders on a debt standstill until the end of March and with bondholders on a working capital facility of $6m, also due end-March. “We expect both of these agreements to be formally documented before our financial year-end,” said Bosma.
The company’s share price collapsed from 0.95p to 0.30p this week.
