JOHANNESBURG (miningweekly.com) – Sales revenue from diamond producer Trans Hex’s South African operations increased by 59.4% in the six months ended September 30, from R259.7-million in the first half of the prior year, to R414.1-million in the period under review.

This was largely the result of a 51.4% increase in average prices, which was partly offset by a 1.6% decrease in carats sold.

Revenue was also positively affected by a 13.8% weakening in the rand and an increase in average diamond size, which increased the average realised price from $1 028/ct in the first six months of 2013 to $1 557/ct.

South African production, meanwhile, increased by 48.5% to 32 450 ct in the half-year, while average grade at the Lower Orange River (LOR) operations increased by 67.9% to 1.31 ct/100 m3, owing to the mining of “more favourable” scour areas at the Baken and Bloeddrift mines, in the Richtersveld region.

This increase was, however, partly offset by a 12.4% decrease in volumes treated. 

The group reported an after-tax profit for the period from continuing operations of R25.2-million, while profit from the discontinued Luarica and Fucauma operations, in Angola, amounted to R10.6-million.

The group, therefore, reported a profit for the period of R35.8-million, while cash and cash equivalents at the end of the reporting period increased by R56.5-million to R351.1-million.

In South Africa, the cost of goods sold increased by 5.4% to R337.7-million, mainly owing to an increase in contractors fees, as well as maintenance and other inflationary increases, offset by a positive stock movement of R88.4-million.

Unit costs of production at the LOR operations increased by 29% as a result of a 12.4% drop in volume and an increase in operating costs. 

Gross profit for the South African operations amounted to R76.3-million, achieving a pre-tax profit of R44.5-million.

In Angola, production at the Somiluana mine, in which Trans Hex held a 33% stake, increased to 44 400 ct, owing to a 40.1% increase in grade, partly offset by a decrease of 11.4% in volumes treated.

Total sales increased to $21.3-million at an average price of $513/ct.

Somiluana's operating margin was 37% and the mine generated net profit of $7.9-million.

While not declaring an ordinary dividend, Trans Hex declared a one-off special cash dividend of 50c apiece, to be paid on December 1, following the successful conclusion of the acquisition of Namaqualand Mines.

Trans Hex announced on October 29 that the R166-million acquisition of Namaqualand from De Beers Consolidated Mines had become effective.

OPERATIONAL PROGRESS
In South Africa, stripping of overburden in the main channel at Baken continued during the first six months of the financial year, with “encouraging” results.

Average grade increased to 1.42 ct/100 m3, while the average diamond size improved to 1.35 ct and the average price of Baken diamonds to $1 379/ct.

The Richtersveld operations were, meanwhile, positively affected by an increase in average grade and diamond size at the Bloeddrift mine.   

In Angola, mining activities during the period continued to focus on the east bank of the Luana river, where the grades and diamond values continued to exceed resource estimations. 

OUTLOOK
Operations at the newly acquired Namaqualand project would start with the construction of a final recovery plant at Northern Cape mining town Kleinzee, which was expected to be operational by January next year.

At Mitchell's Bay, drilling, bulk sampling and the construction of a production plant were planned for the first quarter of next year.

At the LOR operations, stripping operations in the Baken central channel would continue until the economically viable gravel in the main channel had been exhausted.

Owing to the encouraging results during the period under review, stripping operations were expected to continue until the end of the 2016 financial year, after which mining activities would focus on shallow deposits and lower-grade stockpiles. 

At the Richtersveld operations, the steady performance at the Bloeddrift mine was expected to continue in the next six months.

“Owing to disappointing exploration results at the Jakkelsberg mining area, [the] relocation of the plant and mining equipment is planned. South African production for the 2015 financial year is now expected to be around 57 000 ct,” the company outlined.

In Angola, the Somiluana mine was increasing its production capacity through the reinvestment of surplus internal cash flows.

Owing to the encouraging results and, to speed up the expansion of the production footprint, external funding was being considered. 

Production results and geological work through drilling and bulk sampling indicated that carat production for the 2015 financial year would surpass the 72 000 ct achieved in 2014.

MARKET EXPECTATIONS
Trans Hex outlined that the short-term sentiment in the rough diamond market remained “steady but cautious”.

“Demand for high-quality alluvial goods continues to be solid and interest in Trans Hex production is expected to remain high. The long-term market outlook remains positive owing to natural production constraints and indications that diamond mines worldwide will struggle to keep up with demand,” it stated.

Established markets such as the US and emerging markets, such as China and India, continued to show strong demand.